House Commerce Committee Passes Internet Tax Freedom Act

(May 15, 1998)  The House Commerce Committee passed a "consensus" version of the Internet Tax Freedom Act on Thursday by a vote of 41-0.  The bill, HR 3849, contains a three year moratorium on new state and local Internet taxes.  The bill now goes to the full House.  It has yet to pass the Senate. 

Related Page: HTML Copy of HR 3849.

The foremost backer of the ITFA in the House, Rep. Christopher Cox (R-CA), stated at the hearing that "the Internet Tax Freedom Act is based on a simple principle: information should not be taxed."  The bill would ban any new state or local taxes on Internet access services, bit taxes, or discriminatory taxes.   It also bans the FCC from setting prices for Internet access or online services, and from collecting regulatory fees from providers of Internet access or online services.

MORATORIUM.  "For a period of 3 years following the date of the enactment of this Act, neither any State, nor any political subdivision thereof, shall impose, assess, collect, or attempt to collect (1) taxes on Internet access or online services; (2) bit taxes; or (3) multiple or discriminatory taxes on electronic commerce."

EXCEPTION TO MORATORIUM.    "The moratorium in subsection (a)(1) shall not apply to taxes on Internet access or online services generally imposed and actually enforced under State law before March 1, 1998."

(See, Section 5.)

"If there is one thing that governments are good at it's taxing and regulating," said Rep. Rick White (R-WA).  "Unfortunately, that's not what is best for the Internet, for consumers or for our future.  Rather than killing the goose that laid the golden egg, we need to find ways to ensure that the Internet continues to grow and prosper."

The bill also establishes a temporary Advisory Commission on Electronic Commerce to study electronic commerce tax issues and report back to Congress in two years.  State and local officials are given about half of the seats on the Commission.  However, the recommendations are not binding on Congress.  (See, Section 6.)

The bill also declares that it is the sense of the Congress that the President should seek bilateral and multilateral agreements through the World Trade Organization and other international bodies to keep Internet access and services tax free, and free from undue regulation, and to keep international electronic commerce free from undue tariffs.   (See, Section 9.)

However, the bill does not bar the FCC or the federal government from taxing the Internet.  Rep. Joe Barton (R-TX) stated that "I don't think it goes far enough.  We are strangely silent on taxation on the federal level."  However, he concluded that "this is a good step in the right direction," and voted for the bill.

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Rep. Chris Cox

Rep. Cox has long been promoting an ITFA in the House (HR 1054), while Sen. Ron Wyden (D-OR) has backed one in the Senate (S 442).  Several other related bill have also been introduced.   The bill voted on by the Committee, HR 3849, is a "consensus" version containing provisions acceptable to a wide range of congressmen and senators, as well as many state and local officials.

Rep. Cox stated that "this has been a bipartisan and bicameral effort from the get-go.  While the compromise we reached in this bill is not yet reflected in the Senate bill, I am hopeful that we will soon be able to have a House-Senate conference and get this bill to the President, who has endorsed it in advance."

Story: Clinton Endorses ITFA, 2/26/98.
Document: Clinton's ITFA Speech, 2/26/98.

HR 3849 was introduced late Tuesday by Rep. Cox and Rep. White.  Many congressmen at the hearing credited Reps. Cox, White, and Edward Markey (D-MA) for their hard work in drafting the bill and building bipartisan support.

House Commerce Committee Chairman Thomas Bliley (R-VA) allowed committee members to offer amendments.  But, there were none, except one from Rep. Cox to correct some minor technical matters and errors in punctuation.

The bill passed on a roll call vote by 41 to 0.  Ten members of the Committee were absent and did not vote.

The nearest thing to opposition to the bill came from Rep. Bobby Rush (D-IL), who referenced a study which argued that "a federal moratorium on Internet commerce taxes will erode state and local revenues and shift burdens to lower income households."   However, the Chicago congressman still voted for the bill.

Related Website: Rep. Chris Cox's Internet Tax Freedom Act Website.