WASHINGTON -- While leading Virginia Republicans to their first majority in both houses of the Legislature last fall, Gov. James Gilmore III was also chairing the 19-member Advisory Commission on Electronic Commerce (ALEC). Last week, after studying the Internet taxation issue for 10 months, Gilmore's panel recommended to Congree that a three-year federal moritorium on Internet taxes be extended an additional five years, until 2006.
The commission also suggested, among other things, that federal lawmakers permanently ban Internet access taxes and eliminate the federal telephone tax. Brilliant, combative and a staunch foe of taxes, Gilmore is unswayed by the fact that 36 of the nation's governors have informed Congress they disagree with the ACEC's stance on Internet taxation. Gilmore spoke to Stateline.org's Blair S. Walker in Washington after delivering his commission's report to Capitol Hill.
Stateline.org : What do you see ultimately happening with the Internet taxation issue?
Gilmore : It's probably too soon to say exactly what the Congress will ultimately do. But they seem to be quite anxious to adopt portions of the proposal of the E-commerce commission right away. There are discussions about additional bills being put in, both in the Senate and the House. We'll just see what happens. I guess that my goal was to run a fair commission, one that everyone could have an opportunity to have their say and to come forward with something that was creative and comprehensive.
Stateline.org : Are you satisfied with the commission's ultimate decision and recommendations?
Gilmore : Oh, very much so.
Stateline.org : Do you think they're going to be implemented?
Gilmore : I hope it will be implemented. For the sake of the people of the United States.
Stateline.org : You know that a delegation of governors, state officials, federal representatives appeared on Capitol Hill a few days ago to come out against a tax-free Internet?
Gilmore : Well, certainly. Again, every point of view was heard on this commission, and so was theirs. And there are a group of people who very much don't want to have an elimination of taxes on the Internet. They want taxes on the Internet. There are people that want that. We understand that. But that did not command a majority of the commission.
Stateline.org : Do you see having a tax-free Internet as being inherently unfair? If you look at the digital divide issue, there are people who cannot shop over the Internet and can't enjoy the same tax-free benefits as those who have computers.
Gilmore : No the national policy of the United States ought to be to make computers and access to the Internet as commonplace as the telephone. At the beginning of the last century, the telephone was a luxury good. Today, we have to strive to make it our national policy to let everybody have an opportunity to have access to computers and the Internet, so that they can improve the quality of their lives. And hopefully without overweening taxation.
Stateline.org : What would you say to your brethren who live and die based on the sales and use tax?
Gilmore : I'd say not to worry. Everything that we've seen so far shows that the sales and use tax is going up, that we're awash in money from the sales and use tax. The (Internet) industry itself is producing additional revenues, both in terms of employment, property taxes, business taxes. So we should not be concerned about that. And I think we can afford to give a little bit of a break to the people of the United States. The people of the United States need more of their money so they can grow and work and buy a little better school clothes for their kids, or a little better vacation or a little better house. People need opportunities to have some of their own wealth so they can build a better quality of life for themselves. And that's something we ought to be thinking about -- it's just as important as anything.
Stateline.org : What would you say to people who claim multibillion dollar companies don't deserve breaks?
Gilmore : No, they're not getting any. This commission is about breaks for people, not breaks for corporations. I could elaborate.
Stateline.org : Please, feel free.
Gilmore : For example the Commission calls for the elimination of the 3 percent telecom tax. Who pays that? People pay that. It calls for the elimination of access taxes on the Internet. Who pays that? Individual working men and women out there, and their kids who are going on the Internet. They pay that tax.
Stateline.org : What happens to states if there's an economic downturn?
Gilmore : What's the problem? Let me identify the problem, first.
Stateline.org : Okay, if you have a downturn and these people who are really dependent on these sales and use taxes start getting hit hard, including Virginia. And you see that the prosperity we're enjoying now
Gilmore : I'll give you two answers. The first is, if this (tax-free Internet) policy is followed, and we keep boosting up the economy and keep boosting up industry, then we reduce the possibility that when there's a downturn that there will be an actual dramatic loss. Frankly, we haven't really ever again seen a Depression type of loss, probably never will again. We have, on the other hand, seen some reductions in rates of growth. We have seen some of that. And we have seen some losses, in a mild way. But if you boost up this economy, you minimize the danger of any of that kind of thing going on. Then, there's a second answer: Gee, wouldn't it be great if governors at that point said? `Gee, maybe I better make some priorities. And some things are worth funding and some aren't.' And maybe that's what we ought to do.
For the commission's report, click here.