North Korea Sanctions Enforcement Act of 2016

Floor Speech

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Mr. ROUNDS. Mr. President, I rise to voice my opposition to an upcoming cloture vote on the conference report for the Trade Facilitation and Trade Enforcement Act, commonly known as the Customs conference report. This vote is expected tomorrow.

While I am supportive of the conference report as it relates to the Customs legislation, added to the bill at the last minute is a measure known as the Internet Tax Freedom Act or ITFA for short. ITFA would put in place a moratorium to permanently prevent State and local entities from imposing existing sales and use taxes on Internet services.

In the past, I have expressed my support for ITFA as long as it was tied to the Marketplace Fairness Act, or MFA, which would allow State and local governments to collect sales and use taxes from online retailers without a physical presence within their State.

In South Dakota, this is a matter of fairness to the families who own small businesses and support our local communities. They collect sales taxes on their products and on their services. Internet sales providers are not required to provide a collection service for those States for services or products that are being delivered into those States. It requires congressional action in order to allow them to accomplish this.

Pairing these plans would have been a net benefit for States, local governments, and small business owners who are already required to collect sales and use taxes on their products and services. Together they would represent sound tax policy, but that is not what we are doing with the Customs conference report by including ITFA and not including the Marketplace Fairness Act.

ITFA, enacted by itself, would put in place a moratorium to permanently promote State and local entities from imposing taxes on Internet services at the State and local level with no consideration or offset for the tax revenue lost by States or local governments that already collect many of these taxes.

I am all for cutting taxes, but I am also a strong proponent for the Tenth Amendment and local control and tax fairness for South Dakota businesses. In places like South Dakota, we are actually pretty good at balancing budgets. In fact, we are required do it every single year. Washington has no business telling States or city commissioners how to run their books.

ITFA has zero impact on the Federal budget, but it really impacts States and local communities. I believe ITFA paired with the Marketplace Fairness Act continues to make sense. One without the other does not.

My opposition is not based on disagreement over Internet access. We need it. We should make it available. My opposition is based on the principle that we are taking away important revenue sources for State and local governments without any means for them to recoup their losses so they can continue to provide essential services to our communities.

Let me explain why sound and comprehensive tax policy is so important and why ITFA and MFA should continue to be a package deal. If the President signs a Customs conference report into law in its current form with ITFA attached to it, municipalities in my home State, South Dakota, will lose $4.3 million in revenue annually. That is a revenue they rely on to fund essential services, such as training for firefighters and police officers, maintenance for parks, upkeep of community centers and libraries, and repairs to critical roads and bridges.

Without any way of recouping the loss, local leaders will be forced to make a tough decision to cut those important services to the community or to raise other taxes. Why is Washington making this decision?

In addition to municipalities losing out on important funds, the State of South Dakota would also lose out to the tune of $9.3 million annually. Maybe in Washington DC we don't care about $9.3 million, but in South Dakota they do. Well, we don't balance our budget, but every single State out there or just about every State does.

When we step back in and we tell them we are going to unilaterally take away one source of revenue, but we still expect them to provide the services, it seems to me we are moving in the wrong direction. We don't have the luxury of South Dakota punting. We are required to balance our books every year. At the State and local level, every single dollar counts.

Singled out, it is not right for the Federal Government to dictate State and local budgets, as the ITFA part of the conference reports attempts to do, to cut a State and local revenue source.

It is unfair to States like ours, which operate under tight budgets and stretch every dollar to the maximum. In fact, in South Dakota we aren't overtaxing. Our State burden is the second lowest in the Nation. We don't have an income tax. We rely on a very broad sales tax. That is the way our people have wanted to do it. That is why conventional wisdom in this body and elsewhere has always been the ITFA, which would stop taxing the cost of Internet services, would be paired with the MFA--the Marketplace Fairness Act--because MFA lets State and local governments recover the losses from ITFA.

MFA would make certain that Main Street businesses aren't at a competitive disadvantage to companies that have no physical presence, employees or investments in States such as South Dakota because right now they don't have to collect that sales tax or the use tax for products that are being delivered into the State. Brick-and-mortar businesses have that requirement.

Right now Main Street businesses are operating under a disadvantage. MFA would level the playing field. These brick-and-mortar stores are the businesses that provide good-paying jobs in South Dakota, pay local property taxes, sponsor community baseball leagues, and send their kids and grandkids to South Dakota schools and invest in the future of our State.

We have an opportunity to level the playing field for them, rather than picking winners and losers so they can continue to be successful and enrich the lives of South Dakotans. Let's let the States and local governments decide how to manage their finances.

Under MFA, South Dakota would bring in approximately $25 million in new tax revenue, which would more than make up for the losses under ITFA. If we pass ITFA without MFA, it dramatically decreases the chance of MFA being passed in the years to come, which is a huge blow to the mom-and-pop businesses who are struggling to compete with online vendors.

MFA passing the Senate without ITFA is unlikely dead on arrival in the House. ITFA would see a similar fate if not dumped into the Customs conference report. It would not pass the Senate alone. There is simply no evidence to suggest that either measure would pass as stand-alone legislation, but together sound tax policy would move.

That is why it is so important that ITFA not be implemented without also implementing the Marketplace Fairness Act. Together the two can make a real impact on the lives of South Dakotans and all Americans by providing permanent tax relief to South Dakota families, leveling the field of play for brick-and-mortar businesses that are contending with an increasingly competitive online marketplace and at the same time assure State and local governments can continue to provide essential services to their constituents while balancing their budgets. That is something we could learn a lot about. Because the Customs conference report includes only ITFA and fails to address MFA, I will open oppose cloture on this legislation, and I encourage my colleagues to join me.

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