THE DEPUTY SECRETARY OF THE TREASURY                                                          WASHINGTON                                                        June 23, 1998

The Honorable Newt Gingrich
Speaker of the House
United States House of Representatives
Washington, D.C. 20515

Dear Mr. Speaker:

As the House prepares to consider H. R. 4105, the Internet Tax Freedom Act, I welcome the opportunity to share the Administration's views on this important legislation.

The Administration strongly supports a temporary and appropriate moratorium on taxation of the Internet and electronic commerce. The dramatic growth of the Internet and electronic commerce is creating jobs and economic growth, expanding customer choice, and making U.S. firms more competitive in global markets. We would not want duplicative, discriminatory or inappropriate taxation by 30,000 different state and local tax jurisdictions to stunt the development of what President Clinton has called "the most promising new economic opportunity in decades." Thus, any taxation of the Internet and electronic commerce must be clear, consistent, neutral, and non-discriminatory.

At the same time, we must not allow the Internet to become a tax haven that drains the sales tax and other revenues that our states and cities need to educate our children and keep our streets safe. In conjunction with this moratorium, we need to establish a commission that will explore the longer-term tax issues raised by electronic commerce, and develop a policy framework that is fair to states and localities while allowing the Internet to earn its fair place in the ever-changing business world.

The Administration strongly urges the House to act now to pass this legislation as we work to accomplish these two goals. The Administration will have suggestions for improving the bill, but we believe that any outstanding issues can be resolved in a House-Senate conference.

The Office of Management and Budget has advised that there is no objection from the standpoint of the Administration's program to the presentation of this report.

(An identical letter was sent to the Honorable Richard A, Gephardt, House Minority Leader)