Ambitious congressional agenda stalls in 2005: from Internet sales tax collection to tax-exempt bond regulations, GFOA's Federal Liaison Center will continue to represent the interests of state and local governments in Washington in 2006.

• Author: Gaffney, Susan
• Position: Government Finance Officers Association

Congress began the 109th Session with grand ambitions, but unforeseen events prevented many of these new initiatives from moving forward. Social Security reform and various tax measures were moved to the backburner in the aftermath of Hurricane Katrina and the focus on filling two vacancies on the Supreme Court. And although Congress succeeded in passing all of the appropriations bills before the end of 2005, it left the budget and tax reconciliation measures on the table to be taken up as the first order of business in 2006. This article summarizes selected 2005 congressional and regulatory accomplishments of interest to state and local governments

INTERNET SALES TAX COLLECTION

In late December, two senators separately introduced legislation supporting the Streamlined Sales and Use Tax Agreement, or SSUTA. The SSUTA provides for simplification of sales and use tax laws in return for allowing state and local governments to collect taxes on all transactions, including remote sales such as catalogue and Internet sales. Sen. Mike Enzi (R-Wyoming) introduced S. 21,52 and Sen. Byron Dorgan (D-North Dakota) introduced S. 2153.

While GFOA and local government associations support federal legislation allowing states and localities to collect taxes on remote sales, both of these bills include provisions harmful to local governments. For example, both call for state and local governments to simplify their telecommunication taxes in order to collect taxes on remote sales. GFOA, the National League of Cities, and the U.S. Conference of Mayors have all expressed concern that the legislation could open the door for the telecommunications industry to push for an all-out ban on the ability of local governments to impose fees on a range of telecommunication services, including rights-of-way fees, per-line subscriber charges, and franchise fees. Revenues from these fees are a major source of funding for local governments.

GFOA, the National League of Cities, the U.S. Conference of Mayors, and other associations will continue to work with senators Enzi and Dorgan to reach a compromise on this issue. GFOA members are encouraged to write their senators to encourage them to call for the elimination of the telecommunications provisions from the bills. A template for members to use when sending a message to Congress can be found on GFOA's Web site.

STATE AND LOCAL SALES TAX DEDUCTIBILITY

On November 1, the President's Advisory Panel on Federal Tax Reform delivered its much-anticipated report to Treasury Secretary John Snow. (1) The report included many proposals to make the tax code simpler, fairer, and more conducive to economic growth, but one of the key provisions--the elimination of the deductibility of state and local property, sales, and income taxes--is of great concern to GFOA and its members.

GFOA is committed to fighting the elimination of the federal deductibility of state and local taxes...