Politics and Policy This Week

Hurricane Isabel Shutters Congress

Anticipating heavy rains, flooding, and wind gusts approaching 70 mph, official Washington shut down and Congress left town early this week. It’s never good timing for a hurricane, but Congress is especially busy right now as it races to pass new spending bills for 2004 before the current fiscal year ends at the end of the month on September 30th. Let’s hope a little extra time with the folks back home will help Members of Congress say no to the Washington big spenders when they return to continue the appropriations bills next week.

Medicare Showdown

Rep. Pat Toomey (R-Pa), a hero to CSE members for his bold and principled stands on Freedom Agenda issues, is leading the charge in the House of Representatives on Medicare reform. Rep Toomey told the Washington Times, “Without the reforms in the House-passed [Medicare] bill, we’re not going to be supporting the conference report.”

He means it. Rep. Toomey and twelve other House conservatives sent a letter this week to Speaker Dennis Hastert (R-Ill.), saying they will not support the Medicare reform bill, H.R. 1, unless it includes important private competition reforms.

According to CQ Today, the letter said competition is needed to ensure the financial security of Medicare. The letter also stated concerns about the fiscal sanity of creating a new Medicare drug benefit that the Congressional Budget Office will cost significantly more than the $400 billion budgeted over the next ten years. CQ Today quotes the letter: “This is very troubling, especially considering the history of federal entitlement programs costing far more than their early projections.”

All 13 Members signing the letter voted for the Medicare bill when it passed the House in June by one vote, 216-215. They’re giving Congressional GOP leaders a choice: at least some attempt at reform, or no Medicare bill.

House Moves to Permanently End Taxes on Internet Access

Congress is actually making positive, permanent changes to the tax code!

On Wednesday, the House passed H.R. 49, which will enact a permanent ban on all state taxes on Internet access. This tax moratorium, first passed in 1998, is currently in place but expires on November 1st. The moratorium prevents state and local governments from adding a bunch of access fees and other taxes to your Internet dial-up or broadband bill. Without this moratorium, your Internet bill would look more like your cable or cellular phone bill—that is, laden with all kinds of extra taxes and fees.

Surprisingly, the House goes even further on this issue. Ten states: Hawaii, New Hampshire, New Mexico, North Dakota, Ohio, South Dakota, Tennessee, Texas, Washington and Wisconsin, already passed taxes on Internet access before Congress passed the first moratorium in 1998. Under a “grandfather” clause, these states have been able to continue these taxes. H.R. 49 is actually a tax cut because it eliminates this “grandfather” clause. The Congressional Budget Office estimates that abolishing the exemption would result in a total of $80 to $120 million a year in taxpayer savings.

In July, the Senate Commerce, Science and Transportation Committee approved a similar measure. Not surprisingly, though, the Senate version includes the grandfather clause for another three years.

To clarify one point of confusion on this issue, with this bill Congress took no action on the thorny issue of Internet sales taxes. This legislation only bans Internet access. The sales tax issue may come up later this year, as Congress responds to a state-driven effort called the Streamlined Sales Tax Proposal that would create a regime for collecting sales taxes on Internet commerce.

Seattle Dumps “Espresso Tax”

In a crushing 68-32 percent victory, Seattle voters said no to a new ten cent per cup tax on coffee. The tax would have funded government child care programs, but failed to answer the question as to why Seattle citizens should publicly subsidize these services. It’s exciting that even in not-so-conservative Seattle, voters understand that more taxes and spending are not the answer.

California Postcard

On September 13th, Arnold Schwarznegger elaborated on his position on taxes in remarks before the California Republican Party Convention:

“Reviving California’s economy is my first priority. One thing you can count on. I will not raise taxes to pay for the politicians’ mistakes.”

With Arnold, and State Senator Tom McClintock, there are two candidates committed to real spending discipline in Sacramento threatening to win the recall special election. So are we really surprised that this week the liberal judges in the federal Ninth Circuit Court (George Will calls them “the left wing of a left-wing court”) would rule favorably on an A.C.L.U. suit to postpone the election? Stay tuned.


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