One Year Ago: E-Commerce Now A Top Presidential Campaign Issue

Originally published on December 17, 1999 and brought to you today as a time capsule.

As the five front-running candidates for the U.S. presidency shift their campaigns into high gear, electronic commerce is joining education and campaign finance reform among the more popular topics of debate.

In fact, the question of whether goods sold on the Internet should be subject to sales and use taxes has given at least two candidates fuel for direct attacks on their opponents as the campaigns drive toward the late-winter kick-off of a busy primary election season.

Plugging A Ban

Republican presidential candidate and publishing industry heir Steve Forbes was the first candidate to forcefully come out against Internet sales taxes, declaring in an April 1998 statement that, if elected president, he would abolish Internet taxes for five years.

More recently, Forbes adjusted that position to make the ban permanent. Last Tuesday, he became the first presidential candidate to sign the E-Freedom Declaration devised by the E-Freedom Coalition, a national partnership of conservative organizations that opposes taxes on the Internet.

“I, Steve Forbes, hereby declare that, if elected to the office of president, I will support making permanent the current ban on Internet access, sales or use taxes, and will work to reduce and ultimately eliminate discriminatory taxation on telecommunications services,” he pledged.

Although the declaration is simply a fancy way of restating his earlier position, it also comes with the endorsement of the coalition, whose members include the Heritage Foundation, the Competitive Enterprise Institute, the National Taxpayers Union, Americans for Tax Reform, Citizens for a Sound Economy, the Progress and Freedom Foundation, Consumer Alert and the Institute for Policy Innovation.

Forbes ties his Internet tax position to his overall plan to remove tax barriers to expanding productivity in the United States. This plan, the central plank in his campaign platform, includes abolishing the capital gains tax, eliminating “complicated investment depreciation schedules” on new capital investments such as high-tech equipment, and accelerating deregulation in the telecommunications and financial services industries.

Forbes’ Internet tax strategy calls for creating a permanent ban on all new domestic and international Internet taxes and tariffs. “The Internet is the new frontier of freedom in the digital age. We must protect it from suffocating new taxes and tariffs — foreign or domestic. We must protect American innovations and intellectual property rights and encourage the development of e-commerce,” he said.

Congressional Powers

Senator John McCain (R-Arizona) made the issue of Internet taxes part of his platform this fall, introducing a bill in late September to place a permanent ban on such taxes. In addition to his speech to introduce that bill, McCain’s actions as chairman of the Senate Commerce Committee may also signal how important the issue is to his campaign.

As the gatekeeper for commerce-related bills in the Senate, McCain has delayed hearings on a nearly identical bill from Senator Bob Smith (R-New Hampshire) that was introduced in January, prompting the Smith camp to suggest that McCain was trying to deny Smith the legislative credit.

McCain has also used Republican front-runner George W. Bush’s softer stance on Internet taxation as ammunition against the Texas governor. In a December 1st press release, McCain deliberately put the tax question up for debate. “The Internet is the greatest engine of economic growth of our time,” he said. “As this new medium begins to realize its tremendous potential, we must resist the temptation to hamper its growth with old ways of thinking that no longer apply.”

“I ask Governor Bush and the other Republican candidates for President to join me in taking the hi-tech version of the New Hampshire tax pledge,” McCain added. The “tax pledge” is a promise that state anti-tax activists elicited from some campaigners earlier this year not to impose other types of new taxes if they are elected to office.

Courting Supporters

In direct contrast to Forbes, Bush is the Republican candidate who has held out the longest on the issue. As recently as December 1st, the Texas governor came under fire from the media in New Hampshire for failing to take a firm stance one way or the other. The Manchester Union Leader, an influential newspaper in New Hampshire, criticized Bush for putting political strategy above the needs of the people.

Accordingly, the paper has formally endorsed Forbes in the February primary, which is the first in the nation. The paper argues that Bush’s reticence is a strategic attempt not to alienate other governors who are hoping to reap significant Internet-driven incomes for their states.

James Gilmore (R-Virginia) opposes such taxes, while Utah’s Mike Leavitt, also a Republican, favors them. Both sit on the Congressionally appointed Advisory Commission on Electronic Commerce, which is studying the issue.

Bush would likely line up the most support from governors by endorsing a tax on Internet sales, in line with the position taken by the National Governors Association. The NGA has publicly come out in favor of taxing goods sold on the Internet, despite Gilmore’s position to the contrary. “Governors believe that all businesses — not just Main Street businesses — should have to collect the sales and use taxes that are legally owed. They are not proposing any new taxes whatsoever,” the NGA says.

Two days after the Union Leader’s editorial, in a stump speech in Bedford, Bush took a small step toward a firmer stance, saying that he supports continuing a legal moratorium on such taxes beyond the moratorium’s October 21, 2001 expiration date. However, he declined to support a permanent ban.

Low Profiles

Like Bush, the Democrats have been hesitant to be aggressive on the Internet taxation issue. Neither Vice President Al Gore nor challenger Bill Bradley includes Internet taxation on his campaign Web site. However, Gore and Bradley are both big fans of technology in general — and the Internet in particular — as a way to deliver education and services to needy Americans.

Gore and Bradley differ in their areas of emphasis, however, with Gore preaching Internet access for schools and low-income urban families, and Bradley focusing more on the ways the Internet can make the health care industry both more efficient and more cost-effective.

This past November, at a Microsoft-sponsored forum in Redmond, Washington, Gore had the perfect opportunity to garner backing from some of the high-tech world’s biggest innovators, but failed to take the bait. As expected, Gore toed the Clinton administration line on international Internet tariffs, saying, “I will work to keep international tariffs off of INTERNET commerce. I want to keep the INTERNET a duty-free, global free trading zone.” However, he did not go so far as to state a clear policy on sales of goods over the Internet between and among the U.S. states.

Gore, of course, invited unwanted ridicule earlier this year by boasting that he had, in effect, been responsible for the birth of the Internet while serving in the U.S. Senate.

Passing the Ball

Bradley, the former NBA basketball star and Senator from New Jersey, has also danced around the Internet. Campaign staffer Sara Howard told the E-Commerce Times Thursday that Bradley generally believes it is too early to consider taxing the Internet.

“Bill Bradley feels that the potential of the Internet is far from being fully realized. Taxation at this stage runs the risk of stifling our economy’s strongest engine of growth,” Howard said.

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