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Director, Oregon CSE
Before the Oregon Senate Revenue Committee
On the Matter of S.B. 660 and Internet Taxation
March 15, 2001
Thank you very much for the opportunity to speak to you this morning about a bill of great significance to Oregon Consumers, SB 660, "The 2001 Internet Tax Ban." My name is Russ Walker and I am the director of Oregon Citizens for a Sound Economy, a citizen-based grassroots organization with over 8,000 members across the state.
CSE has been fighting for less regulation, lower taxes, and more economic freedom since our founding in 1984. For the past three years, CSE has been educating our membership and the public at large about the danger that an Internet tax and tax cartels would pose to consumers. Oregon consumers are particularly threatened by such schemes. A tax cartel would place an undue regulatory burden on Oregon businesses unaccustomed with sales tax collection that would be transferred to Oregon consumers in the form of higher prices. A tax cartel could also force Oregonians to subsidize the tax collection efforts of other states through our tax dollars. The legislation before you can stop these proposals dead in their tracks and institute a wall of safety for Oregon consumers.
Last year, Oregon CSE mobilized grassroots support for an Internet Tax moratorium through a frenzy of e-mails, phone calls, and faxes to Washington County Commissioner Delna Jones of the President's Advisory Commission on Electronic Commerce. In a conversation I had with Commissioner Jones last year, she exclaimed, "I got so many faxes, letters, and phone calls and a billion e-mails all with your organization's name on it."
Oregon CSE also mobilized grassroots support in 1999 for the successful alternative telecommunications regulation initiative. Thanks to numerous calls, letters, and personal contacts, Oregon CSE was able to push telecom regulation reform to the top of the legislative agenda, and get it passed. This much-needed reform has increased telecom investment in the state and dramatically improved access to the Internet in general, and broadband Internet in particular.
We still have much to do to remove regulatory barriers to investment and competition in Oregon and Oregon CSE members understand that. Our activists continue to show up and to demand less government intrusion in the marketplace on a regular basis.
Consider an abbreviated list of what we call CSE club meetings from the last six weeks alone. Since the first of February, Oregon CSE has held meetings with political activists - regular consumers who are proud to be your constituents - in places as geographically and politically diverse as Medford, Ontario and Portland. Mr. Chairman, on February 20th and March 12th we hosted meetings in Baker City that attracted a total of 56 CSE members. During the first week of February, we met right here in Salem and several attendees traveled from the Portland area. On February 27th, Oregon CSE made a presentation to 35 activists in Eugene. More than 100 people turned out in Yoncalla on the first of February so we went back to that area and had a second meeting in Elkton on the 14th.
All told, the subject of Internet taxation has been a topic of discussion with more than 2,000 Oregon CSE members since the first of the year.
Our job is to educate consumers and to help them get involved in the public policy process. You can see that we are very serious. This morning I am happy to submit for the record the statement of an Oregon CSE member who was unable to attend this meeting due to a scheduling conflict. Mr. Greg Drew is a leader in his company, he is a leader in the development of a high-tech economy for Oregon, he is a leader in our business community, and he is an active member of CSE. Copies of his statement have been provided to the committee for your review.
Oregon CSE will continue to exert pressure this year to ensure that Oregon consumers are protected through enactment of SB 660. The bill would ban any Internet sales or access taxes in state, and prohibit the state, or any of its political subdivisions, from assisting in the collection of a tax, fee, or charge imposed by another state.
Tax cartel proposals have placed Oregon consumers in a state of tax-purgatory. If something is not done this legislative session, Oregon consumers may be enlisted to pay for a costly and inefficient extra-constitutional tax bureaucracy. The Oregon legislature must defend its consumers from such a desperate and ill-conceived proposal. If other states wish to drive investment outside their borders and compromise consumer privacy through state-sponsored accounting software and so-called trusted third parties, that is their mistake to make. But there is no reason Oregon consumers should fall victim to such a misguided scheme. We must not hire out tax collection to firms who would have an incentive to over-collect taxes.
If we take a step back from the heated rhetoric and reflect on the case for an Internet tax cartel for a moment, its perverse logic becomes apparent. When tax collectors first came up with the cartel idea, their thinking went something like this: "It is more difficult to collect taxes on out-of-state Internet purchases, so we must place a new burden on out-of-state businesses and consumers to collect the taxes for us."
Of course, such regulation would require retailers to know the specific tax laws of over 7,000 independent U.S. jurisdictions, collect the appropriate tax, and then remit it to the relevant tax authority. The cost to comply with this convoluted system would be passed on to consumers in the form of higher prices.
Once the unjustifiable compliance costs of this regulatory burden became known, the original cartel proposal became politically untenable, so revisions had to be made. To address this concern, the two leading cartel proposals encourage states to "simplify" their tax systems to an unspecified degree and use tax dollars to reimburse retailers, or accountants with whom they contract, for the cost to comply with the regulatory burden.
This scheme would tax consumers to subsidize sellers so they can collect more taxes from the same consumers!
Such insanity cannot be expanded to Oregon. I urge you to pass SB 660 to avoid such a desperate and ill-advised approach. As a final word, I have attached a copy of a new policy study by my colleague Jason Thomas. He explains how the harmful tax proposals would work and what effect it could have on Oregon consumers.