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Clinton Supports Moratorium On Internet Sales Tax


SAN FRANCISCO (AllPolitics, Feb. 26) -- President Bill Clinton endorsed a moratorium on new sales taxes on the Internet and its electronic commerce, arguing the Internet is just emerging as an economic powerhouse and the government should not stifle its growth with taxes, for now.

"There should be no special breaks for the Internet, but we can't allow unfair taxation to weigh it down and stunt the development of the most promising new economic opportunity in decades," Clinton told a group of technology leaders at a forum Thursday. (384K wav sound)

The president credited the technology industry with a significant role in the current good economic times, and predicted the Internet would play an even greater part in the economy's continued growth and health. "This explosion of real commerce has the potential to increase our prosperity, to create more jobs, to improve the lives of our people and to reach into areas that have not yet felt prosperity," Clinton said. (352K wav sound)

"But it raises new and serious issues as well. How can we further its growth and foster its magnificent freedom without allowing it to be used as a tax haven that drains funds our states and cities need to educate our children, and make our streets safe?" (448K wav sound)

Clinton's support of the Internet Tax Freedom Act currently before Congress puts him at odds with the nation's governors, who want to establish a single sales tax rate for online shopping.

To mollify the governors, Clinton called for a bipartisan commission of elected officials, business leaders, consumers and representatives of the Treasury Department to study the issue of taxing the Internet. The president said the moratorium would give this group "time to work through what is a very, very complex issue."

Clinton said existing taxation methods are outdated for the fast-paced online environment and new rules must be established that are "pro-growth, non-discriminatory but will provide appropriate revenues are communities to meet vital public purposes."

Government figures show Internet commerce totaled more than $8 billion last year but is expected to grow to more than $300 billion by 2002. Internet companies are required to collect sales taxes only if they are shipping the product to the same state in which the company is based.

The legislation does not prevent state and local governments from applying existing taxes to electronic commerce, Clinton said, so long as there is "no discrimination between an Internet transaction and a traditional one."

The president did not endorse a specific time limit for the moratorium; a related House bill calls for six years, while a Senate bill calls for an unspecified moratorium.

CNN's John King contributed to this report.
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Thursday Feb. 26, 1998

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