AEI's Newt Gingrich Addresses Internet Taxes

(March 19, 1999) Former House Speaker Newt Gingrich spoke about Internet taxes at an American Enterprise Institute event on Friday, March 19.

Newt Gingrich Senior Fellow AEI

Newt Gingrich is a former Republican Speaker of the U.S. House of Representatives, and now a Senior Fellow at the American Enterprise Institute. He spoke about the Internet Tax Freedom Act, and the Commission which it created to study taxation, at a panel discussion hosted by the AEI in Washington DC.

Gingrich was not a scheduled speaker at the event. Rather, he attended as a member of the audience, and then spoke out during the question and answer session. The event featured the presentation of a lengthy paper by Prof. Austan Goolsbee, of the University of Chicago Graduate School of Business.

Congress passed the Internet Tax Freedom Act (ITFA) last October. It provides for a three year moratorium on new discriminatory state and local taxes on the Internet. It also created a Commission to study taxation of the Internet and other remote sales.

Prof. Goolsbee presented his statistical finding that in localities with higher sales tax rates consumers with Internet access tend to make more purchases online. He estimated that applying existing sales taxes to Internet commerce would reduce the number of online buyers by 25% and spending by more than 30%.

Prof. Goolsbee also stated that other studies have shown the same pattern for mail order sales.

This is what Gingrich had to say.

"I'm Newt Gingrich, with AEI. You have looked at the mail order. And you have looked at the Internet. Have you looked also at the TV channels like QVC? And what is the impact there? Is that also part of the same phenomenon?"

After a response by Austan Goolsbee that he had not studied other non-geographic distribution channels, Gingrich continued:

"Would you then know if you have any tax policy changes? Would you capture them as well as the mail order? Because you have now created a much larger group of   resisters than you had ... [audience laughter]. If you only pick on retail Internet, then you only have a very small group to go mug. But if you start adding in the mail order catalogues and the TV channels, particularly if the TV channels start explaining what the legislators are trying to do [more laughter] you create a very different, you just create a very different dynamic. And I am curious if those three become --you know, for example, if the Internet commission ought to be looking at all three of them, and basically be looking at non-geographic sales as a totality rather than the particular delivery mechanism of non-geographic sales?"

"I must say, you have raised an excellent political point there. I don't think that there is any choice. I think that they have to look at those things," responded Prof. Goolsbee. "And I think -- as you suggest -- once they do that, there is going to be a lot of opposition."

Justin Lilley, the telecommunications counsel to the House Commerce Committee, also commented on the Commission created by the ITFA. "Congress, as only Congress can do, has set up a Commission that is now being sued. It hasn't even met. [laughter] It is like arguing over the size and the shape of the table. That is where we are now."

Lilley also said that Chairman Tom Bliley (R-VA) and others on the House Commerce Committee wanted "to find ways to extend the moratorium on in perpetuity, as well as to export it abroad."

During the debate in the Senate on the Internet Tax Freedom Act last year, supporters of the bill sought to limit the scope of the study. Sen. John McCain (R-AZ), who was the Republican floor manager, Sen. Ron Wyden (D-OR), who was the Democratic floor manager, Sen. Judd Gregg (R-NH), who represents a state with a flourishing mail order catalogue business, and Sen. Joseph Lieberman (D-CT), all argued for  limiting the scope of the study to Internet taxation.

On the other side, Sen. Bob Graham (D-FL), Sen. Tim Hutchinson (R-AR), and others, supported expanding the scope of the study to cover all sales and use taxes on remote sales. Sen. Hutchinson offered an amendment to expand the scope of the study. Sen. McCain made a motion to table it, which failed on a roll call vote of 30 to 68. The Senate adopted the expanded scope of the study.