<p>Hey, kids! It’s time for a U.S. history lesson and in the process, we’re going to test your reading comprehension skills. Please read this chronology of the Spanish-American War and tell us which line doesn’t make any sense: </p>
<p>February 24, 1895 Second Cuban Insurrection against Spanish rule begins.
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August 26, 1896 Philippine Revolution against Spanish rule begins.
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January 17, 1898 Concerned about rising violence and the safety of Americans in Cuba, American Consul-General Lee asks for U.S. naval ship to be dispatched to Cuba.
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January 25, 1898 U.S. battleship Maine arrives in Havana.
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February 15, 1898 Explosion sinks Maine in Havana harbor, killing 266 U.S. crewmen.
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February 16, 1898 Congress passes telephone tax to fund possible military action.
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April 22, 1898 U.S. Navy begins blockade of Cuba.
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April 23, 1898 Spain declares war on U.S.
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April 25, 1898 U.S. declares war on Spain.
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May 1, 1898 U.S. Admiral Dewey wins Battle of Manila Bay in Philippines.
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July 1, 1898 Teddy Roosevelt’s "Rough Riders" win Battle of San Juan Hill in Cuba.
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August 9, 1898 Spain surrenders.
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May 17, 2000 House Ways and Means Committee recommends repeal of telephone tax.
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So, which line doesn’t make any sense? Well, if you answered “the last one,” you’re correct. The Federal excise tax on your telephone bill, currently 3 percent and included in general revenues to the Treasury, outlived its purpose more than 100 years ago. </p>
<p>In truth, this tax born in the shadow of war in 1898 has come and gone several times, and for most of its history the rate fluctuated until Congress voted in 1990 to make it permanent at 3 percent. Still, this year marks the third century in which Americans are paying a tax originally created to support a war which lasted less than five months. When you include other state and local taxes, that means that some callers and Net users are paying more than 20 percent of their phone bills in telecommunications taxes. </p>
<p>Of course, free market advocates would like to see the repeal of all telecom taxes at all levels. Just like other sales taxes, they’re regressive and they discourage the growth of the online economy. But as a modest beginning to reform, with the Feds running a massive surplus, it’s time to ax the Federal phone tax. I’m the last person to suggest that the government should use taxes to encourage or discourage certain habits like smoking or drinking.</p>
<p>But even if you believe in the role of excise taxes to give us a better society, do you really want to discourage phone calls and Internet usage? If you believe the tax system has a valuable role to play in social engineering, wouldn’t you want to give people a tax credit for embracing new technology? </p>
<p>More fundamentally, there’s an issue of accountability here. We shouldn’t use the telephone system, or any other private network, to collect taxes. We already have the I.R.S. to do that. Politicians who think the government needs more money should be forced to raise income tax rates and explain in the light of day why it’s necessary, instead of slipping obscure charges into the fine print on our various bills.</p>
<p>The telephone tax has done its job. It helped fund not only the Spanish-American War effort, but also U.S. forces in World War I, World War II and Vietnam. Now it’s time to give this tax an honorable discharge. The government doesn’t need the money and America doesn’t need a tax on talking.</p>
<p>Class dismissed. </p>
<p>James K. Glassman is the host of Tech Central Station. </p>

<p>In 1898 the United States entered a brief war with Spain. It lasted less than one year. Theodore Roosevelt and the Rough Riders were catapulted to national fame for their victories over the Spanish Army, and the United States emerged victorious with control over much of what is now Central America. To fund this war effort, President McKinley implemented a luxury tax on a new invention – the telephone. Today, Americans may remember the Spanish-American War when they think of Teddy Roosevelt or hear the expression "Remember the Maine." All Americans should remember it when they pay their monthly telephone bill.</p>
<p>Although the Spanish-American War has been over for more than a century, we still pay this "luxury" tax on our phone bills every month. </p>
<p>Revenues from the telecommunications excise tax do not go to facilitate telecommunications usage or promote new services. The money comes right out of consumers’ pockets and goes into general funds – nearly $6 billion to fund everything from congressional pensions to mohair subsidies. </p>
<p>Although the Spanish-American War has been over for more than a century, we still pay this "luxury" tax on our phone bills every month. The time has come to end this regressive tax on talking.</p>
<p>This week, a House committee voted to repeal the tax. The next step is to get the full House and the Senate to do the same. Write your members of congress and urge them to support H.R. 3916 to repeal this regressive tax on talking.</p>

<p>Mr. Chairman, and members of the Committee, thank you for the opportunity to share my views on the work of the Advisory Commission on Electronic Commerce (ACEC), Internet and communications taxes, and the effect they have on the digital divide. My name is Erick Gustafson, and I present these views on behalf of the members of Citizens for a Sound Economy Foundation (CSE Foundation), a consumer education organization that promotes free market solutions to public policy problems. At CSE Foundation, I am the director for technology and communications policy.1 </p>
<p>More than a quarter-million strong, CSE Foundation's members are in every congressional district of America. Our members distinguish themselves as policy activists. They constantly remind us that decisions made in Washington, D.C., are felt in places far away from here; and that is where CSE Foundation is found. We at CSE Foundation believe that individual liberty and the freedom to compete expands consumer choice and provides individuals with the greatest control over what they own and earn. </p>
<p>The topic of today's hearing has long been an interest for CSE Foundation. Our activists were a force pressing for passage of the Internet Tax Freedom Act and CSE Foundation staff and members have either attended or participated in every meeting of the Advisory Commission over the past year. We were both pleased by the substance of the Commission's full report and frustrated by those Commissioners whose abstention from several key votes limited the report's formal recommendations.2 Despite differing with the Commission on a few key points, we believe that Governor Gilmore and his colleagues have provided Congress with a valuable prescription for addressing a number of issues confronting consumers and our nation's growing technology sector. </p>
<p>In part, Congress has already acted on the substance of the Commission's report by passing The Internet Nondiscrimination Act (H.R. 3709). This legislation would extend the current moratorium for five years and terminate a communications service tax currently being charged to some consumers for Internet access. </p>
<p>When we at CSE Foundation examine the topic of Internet, communications taxes, and the digital divide, we begin with two tenets that are central to our mission: </p>
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Governments already collect far too much money, and individuals are taxed far too much; and,
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Excessive government taxation and regulation of communication services is the greatest impediment to access of technology and further compounds the digital divide. </p>
<p>Consider the following facts: Every state in America began the year with a budget surplus, the collective total of which exceeded $35 billion. State tax revenues have doubled in the last 10 years. Last year alone, state taxes increased by 11 percent. State government spending in 1999 was up 8 percent.3 </p>
<p>At a time like this, the tax debate should be focused on cutting tax rates for consumers and small businesses, not adding new taxes on the Internet. Rather than exploring new ways to tax the engine of our economic growth, government should be looking for ways to end outdated taxes and open the doors of the Internet to everyone. Following the Commission's advice would be a solid step in that direction. In fact, adopting just three of the suggestions in the Commission's report will save American consumers billions of dollars. </p>
<p>Repeal the 3-percent federal excise tax on telecommunications services. The 3-percent federal excise tax on telecommunications services was introduced to fund the Spanish-American War. This tax costs Americans nearly $6 billion each year simply for the "luxury" of keeping a phone in the house.4 The fact that this tax is still on our monthly phone bills 102 years after the Spanish-American War ended demonstrates just how difficult it is to remove a tax. Regrettably, this is just one of the many taxes and outdated regulations that make it more expensive for Americans to go online. We won the Spanish-American War more than 100 years ago; yet, the wartime levy still exists - it is time we win the war against taxes that expand the so-called digital divide. </p>
<p>Extend the current moratorium on multiple and discriminatory taxation of electronic commerce for a minimum of five years. When the Internet Tax Freedom Act was passed, the Internet itself was in its infancy and e-commerce was virtually non-existent. Today the specter of bit taxes on emails, right-of-way taxes on the transfer of information, and other onerous tax schemes are little more than a figment of overactive imaginations. Had any of these plans been allowed to take hold or had the Internet been treated differently from other types of remote sales it is extremely unlikely that we would have the economy we know today. The Senate should, without delay, follow the lead of the House and act to extend the current moratorium so that discriminatory taxes do not threaten electronic commerce. To preserve our rapidly expanding economy we must continue to allow consumers, small businesses, and students to browse, shop, and learn online without facing unique and harmful taxes. </p>
<p>Make permanent the current moratorium on Internet access taxes. Taxes at the on-ramp to the Information super highway raise the cost of going online and keep too many Americans offline every year. Consumers pay between 20 percent and 30 percent in taxes on communications services - tax rates similar to those on "sin" taxes.5 By imposing regressive rates of taxation while simultaneously proclaiming the need to rapidly expand technology to all regions and income levels, government officials only ensure that taxes will hit hardest those who can least afford it. Policymakers must understand, as they look for ways to bridge the digital divide, the best way to give consumers the full benefits of high technology is by removing the high taxes and obsolete government regulations that are barriers to competition and innovation. </p>
<p>CSE Foundation has long asserted, and a study by the Stanford Institute for the Quantitative Study of Society (SIQSS) has found, that eliminating taxes and regulations is the best approach the government can take to bridge the digital divide. The Stanford study found that demographics only account for 20 percent of the digital divide. Unfortunately, government efforts at bridging the digital divide have traditionally been designed to target specific demographic groups. This study indicates that these types of programs will not solve the problem. If government truly wants to get more people online the best solution is to lower the cost of going online. There are numerous free Internet Service Providers (ISPs), but Internet access fees and highly taxed phone lines are barriers to these ISPs. By eliminating discriminatory taxes on communications, the government could lower the cost of going online and take a huge leap forward in eliminating the digital divide. Now is the time for Congress to act and ensure that taxes will not keep Americans offline. </p>
<p>Each recommendation is a step in the right direction, but undoubtedly someone will tell you that America cannot move forward. You may hear that states and cities will lose too much revenue, that small Mom-and-Pop retailers are unable to take on a global electronic market, or that no retailer can compete against an Internet tax advantage. Know that those who tell you such things either seek to increase tax revenue or to protect existing business models from competition. </p>
<p>In the fourth quarter of 1999, the most recent holiday season, total retail sales exceeded $526 billion. Of that total, online retail sales constituted just $5.3 billion or 0.64 percent.6 To claim that states and cities will not be able to fund schools or law enforcement because of revenue lost to Internet sales is an outright lie. The fact is, in spite of all the media attention lavished on e-commerce, an overwhelming number of retail sales still take place at bricks and mortar retailers. Moreover, Internet sales are subject to sales taxes in many instances - the same as catalogue sales have been for decades. </p>
<p>Researchers at the University of Chicago and Harvard University recently calculated the impact of Internet transactions on sales tax revenue. They found that online transactions reduce state and local revenues by only $430 million annually - less than one-quarter of 1 percent of total sales tax revenues. Industry watchers expect online sales to grow by 70 percent per year over the next few years, but even then, the revenue lost will represent less than 2 percent of sales tax revenue in 2003. 7 </p>
<p>Small businesses have embraced the Internet in droves despite facing unfamiliar technologies and unproven ways of reaching customers. A newly released survey shows that small businesses outspent consumers by more than $5 billion last year as they made travel reservations and purchased office and computer equipment in record numbers.8 Those small businesses that do venture online find that, far from being a threat, the Internet actually adds to their profitability. </p>
<p>The Internet economy accounts for nearly one-third of our nation's economic growth. It is estimated that if taxes were applied to online sales, growth in the technology sector would be slowed by 24 percent. Intervention in the high-tech marketplace creates fear and uncertainty among investors and threatens to destroy our economy. The government must be stopped from taxing to death the goose that laid the golden egg. </p>
<p>At the start of the 21st century we have the opportunity and the ability to give consumers the full benefits of high technology without harming Main Street or state governments. The Advisory Commission on Electronic Commerce has pointed us in that direction, I urge Congress to heed their advice and send a strong message that the Internet will remain free from the heavy hand of government taxation. </p>
<p>1CSE Foundation does not receive any funds from the U.S. Government.</p>
<p>2More than seven members of the Advisory Commission on Electronic Commerce abstained on 10 key votes during the Dallas Meeting on March 20-21, 2000</p>
<p>3Background for these tax statistics is available upon request</p>
<p>4Mark Zuckerman, "from 'Remember the Maine' to 'No New Taxes': A History of the Telecommunications Excise Tax" Citizens for a Sound Economy Foundation, July 29, 1999</p>
<p>5Jeffery Eisenach, "The High Cost of Taxing Telecom," study prepared for presentation to the Advisory Commission on Electronic Commerce, September 14, 1999</p>
<p>6"Retail E-commerce Sales for the Fourth Quarter 1999 Reach $5.3 Billion, Census Bureau Reports," U.S. Department of Commerce News, March 2, 2000</p>
<p>7Austan Goolsbee and Jonathan Zittrain, "Evaluating the Costs and Benefits of Taxing Internet Commerce" (Manuscript, May 20, 1999)</p>
<p>8Access Markets International Partners Survey, Released May 15, 2000</p>

<p>Today, Empower America praised the House’s action in passing the Internet Non-Discrimination Act by a vote of 352-75, which included an important five-year extension of the moratorium on new, multiple and discriminatory Internet taxes. </p>
<p>Last week, Empower America Co-Director Jack Kemp sent a letter to every member of Congress, in addition to a study on Internet taxes by Empower America staff, recommending that Congress adopt a five-year moratorium on new Internet taxes. The letter also urged the Congress to reject the National Governors Association’s plan to impose new, uniform national sales and use taxes on the Internet. </p>
<p>"House passage of the Internet Non-Discrimination Act is a victory for the new economy," said Jack Kemp. "The Internet has swept in a wave of economic prosperity to America, creating surpluses for the treasuries of federal, state and local governments. Extending the moratorium on new Internet taxes encourages growth and prevents new hastily-devised tax plans that will burden the Internet’s explosive economic progress during its infant stages."</p>
<p>Kemp said his delight at the adoption of the moratorium legislation, however, was dimmed considerably by the last-minute inclusion of a confusing Sense of the Congress Resolution, the so-called Istook Amendment, which makes it appear that Congress actually believes current state sales taxes violate the moratorium. Under the resolution, Congress’ sense of what constitutes a "non-multiple," "non-discriminatory" state tax—and thus its sense of what constitutes a permissible state tax under the moratorium—seems to have been turned on its head. The Istook language appears to strike at all state sales taxes unless they are nationally uniform and coordinated under a multi-state administrative and policy-making apparatus, i.e., the kind of nationally harmonized system of state sales taxes currently being promoted aggressively by state and local governments. Kemp expressed hope and confidence that the Istook language would quickly be swept aside since Congress can’t put its imprimatur on a radical and controversial change in state and federal tax policy that it has not even debated.</p>
<p>Kemp also noted that the Internet tax vote was an important first installment in the House leadership’s eContract 2000. Kemp said, "When it comes to fostering the kinds of intellectual and technological breakthroughs that have brought us the Internet Economy, the eContract 2000 has it exactly right that ‘freedom is the answer, not government intervention." The Internet’s truly ‘empowering’ technology is breaking down barriers to trade, to knowledge, to wealth and to human understanding everywhere you look. The House is to be applauded for choosing the path of freedom in extending the Internet tax moratorium. Empower America supports the objective of eContract 2000 to foster the growth of the Internet economy, and we’re prepared to keep fighting the good fight in the battles ahead."
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<p>Today, Empower America praised the House’s action in passing the Internet Non-Discrimination Act by a vote of 352-75, which included an important five-year extension of the moratorium on new, multiple and discriminatory Internet taxes. </p>
<p>Last week, Empower America Co-Director Jack Kemp sent a letter to every member of Congress, in addition to a study on Internet taxes by Empower America staff, recommending that Congress adopt a five-year moratorium on new Internet taxes. The letter also urged the Congress to reject the National Governors Association’s plan to impose new, uniform national sales and use taxes on the Internet. </p>
<p>"House passage of the Internet Non-Discrimination Act is a victory for the new economy," said Jack Kemp. "The Internet has swept in a wave of economic prosperity to America, creating surpluses for the treasuries of federal, state and local governments. Extending the moratorium on new Internet taxes encourages growth and prevents new hastily-devised tax plans that will burden the Internet’s explosive economic progress during its infant stages."</p>
<p>Kemp said his delight at the adoption of the moratorium legislation, however, was dimmed considerably by the last-minute inclusion of a confusing Sense of the Congress Resolution, the so-called Istook Amendment, which makes it appear that Congress actually believes current state sales taxes violate the moratorium. Under the resolution, Congress’ sense of what constitutes a "non-multiple," "non-discriminatory" state tax—and thus its sense of what constitutes a permissible state tax under the moratorium—seems to have been turned on its head. The Istook language appears to strike at all state sales taxes unless they are nationally uniform and coordinated under a multi-state administrative and policy-making apparatus, i.e., the kind of nationally harmonized system of state sales taxes currently being promoted aggressively by state and local governments. Kemp expressed hope and confidence that the Istook language would quickly be swept aside since Congress can’t put its imprimatur on a radical and controversial change in state and federal tax policy that it has not even debated.</p>
<p>Kemp also noted that the Internet tax vote was an important first installment in the House leadership’s eContract 2000. Kemp said, "When it comes to fostering the kinds of intellectual and technological breakthroughs that have brought us the Internet Economy, the eContract 2000 has it exactly right that ‘freedom is the answer, not government intervention." The Internet’s truly ‘empowering’ technology is breaking down barriers to trade, to knowledge, to wealth and to human understanding everywhere you look. The House is to be applauded for choosing the path of freedom in extending the Internet tax moratorium. Empower America supports the objective of eContract 2000 to foster the growth of the Internet economy, and we’re prepared to keep fighting the good fight in the battles ahead."
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<p>According to a recent study by the National Trust for Historic Preservation , 84 percent of their Main Street communities consider Internet usage a key factor in small-business growth. </p>
<p>Mom-and-Pop, bricks-and-mortar businesses are looking for innovative new ways to incorporate it into their business models. </p>
<p>Change has come fast and furious to the retail marketplace. Main Street merchants were forced to innovate in order to survive the entry of big, high-volume retailers that can offer a larger selection and lower prices. So, it should come as no surprise that these smaller competitors welcome the opportunities presented by the Internet and electronic commerce. </p>
<p>Unfortunately, a group of tax-hungry state and local politicians to lobby Congress for a new tax system that would discriminate against electronic commerce. </p>
<p>The Internet is not a threat to Main Street bricks-and-mortar businesses. It is a tremendous opportunity. The Internet allows businesses to offer more choices to a larger number of consumers than ever before. It also offers rural customers convenience and a broader selection. </p>
<p>One can be sure that as the Internet becomes a more valuable tool for consumers that retailers will follow them online - just like the small businesses highlighted in the recent National Trust study. Discriminatory tax policies do harm to businesses and consumers alike. </p>
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<p>This week, the Advisory Commission on Electronic Commerce presented its report to Congress. Now, congressional leaders must determine the course of action that would provide consumers with the full benefits of the high-tech economy. Unfortunately, state and local politicians are raising taxes on American consumers and forcing small businesses off the Internet. They use scare tactics and half-truths to promote an agenda that would lead to higher taxes and more government spending.</p>
<p>Thankfully, Senator Judd Gregg (R-NH) has extended his leadership to ensure that these tax-hungry politicians do not destroy the high-tech economy. Gregg, along with Senator Herb Kohl (D-WI), has introduced legislation called the "New Economy Tax Simplification Act" that would prevent taxation without representation. </p>
<p>America's governors and mayors can place tremendous pressure on members of Congress during an election year. They seek new laws to expand their ability to collect new and unfair taxes from online consumers. </p>
<p>CSE activists have been at the forefront of the fight against new taxes on the Internet and electronic commerce. Today is the day to send CSE's petition to a friend so that activists -- veterans and newcomers alike -- can send a message to Congress. No New Taxes on the Internet.</p>

<p>This week, while many Americans were focused on the Internet tax debate in our nation's capital, Iowa Legislators were working on an Internet tax debate of their own.</p>
<p>The Iowa House passed legislation to protect consumers from the grips of state and local tax collectors. More information about this development and about Iowa CSE can be found here. </p>
<p>Unfortunately, while activists fight to repeal stone-age regulations, bureaucrats are on the lookout for loopholes and innovative new theories to tax the latest communications technologies.</p>