Permanent Internet Tax Freedom Act

Floor Speech

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Ms. CHU. Madam Speaker, I rise to speak in opposition to H.R. 3086 in its current form.

As a former member of the Board of Equalization, which is California's elected statewide tax board, and as a member of the Judiciary Committee, I support a temporary--not a permanent--extension of the current moratorium.

Madam Speaker, when the Internet was in its infancy, Congress rightfully put the moratorium in place to outlaw any burdensome tax regulations on Internet access. The Internet has grown tremendously since then, and it will undoubtedly evolve over time. As it evolves, Congress should be called upon to revisit these issues. But I believe that a permanent moratorium would make reexamination of technology and market realities very difficult in the future.

A permanent moratorium would impede a State or local government's ability to make taxing decisions that are right for them. This is the message I have heard from States, counties, and cities. Take, for example, the city of Pasadena, which is the largest city in my district. Pasadena does not have any plans to impose taxes and fees on Internet access. However, it has concerns with a permanent extension that could shut the doors years down the line.

In fact, Madam Speaker, the National League of Cities, the League of California Cities, and the California State Association of Counties all oppose this bill. They are opposing it because they see a dramatic decline of sales tax revenue due to the increase in online sales that are not taxed, and that is why I also support the Marketplace Fairness Act. It would require large businesses to collect online sales tax.

I can tell you that this makes a dramatic difference in whether local government has the funds to fill the potholes and clean the streets. Since enacting its remote sellers sales tax law, my home State of California brought in $260 million in its first year of collection. This is an improvement, but the potential for future growth is even greater, with a little over $1 billion of use taxes still to be collected from remote sales in California alone.

With this act, we can stop the closing of businesses on Main Street and have a fighting chance to keep the jobs that they provide our communities. Keeping the Internet tax moratorium temporary helps in this fight. A short-term moratorium strikes the right balance between respecting the rights of local taxing authority and the ability for the Internet to grow.

Congress must reserve the flexibility to examine the Internet Tax Freedom Act from time to time. That is why I urge a ``no'' vote on this bill.

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