Speeches and Testimony

 

 

July 22, 1999

 

Is ICANN Out of Control?

Introduction

Mr. Chairman, my name is Grover Norquist. I am President of Americans for Tax Reform (ATR).

Americans for Tax Reform is - in simple terms - a government spending watchdog, with deep concerns regarding the breadth of government generally. ATR, as I noted last month in a letter to Congress, opposes all tax increases as a matter of principle. We believe in a system in which taxes are simpler, fairer, flatter, more visible, and lower than they are today. The individuals of the taxpayer's movement believe that the government's power to control one's life derives from its power to tax. That power should be minimized.

Americans for Tax Reform and ICANN

These aforementioned principles have required that Americans for Tax Reform become involved in the growing controversy over the domain name system. On its face, an issue as complex technically and politically cumbersome as the domain name system may seem like an unlikely place to find Americans for Tax Reform, however very few issues are as fundamentally important to America's economic well-being as the future of the Internet.

Last year I was appointed to the Advisory Commission on Electronic Commerce, a commission tasked by congress to make recommendations regarding the allowance of Internet taxation and issues related to electronic commerce. I take this role seriously and want to make sure that every tax that impacts electronic commerce is carefully scrutinized. Also, as President of ATR I wanted to ensure that taxpayers were not increasingly burdened by new taxes.

So, when the Internet Cooperation for Assigned Numbers and Names (ICANN) proposed the world's first global tax - an Internet tax - to support its own $5.9 million operating budget, I was concerned. Under their proposal, each registration of a domain name (the familiar Internet addresses ending in suffixes such as .com and .org would be taxed $1.) I was caused greater concern when I learned that ICANN, while created to be a consensus-based organization that only set standards, was now reaching well beyond that express purpose.

Perhaps at first glance, a $1 tax may not seem like much, but that's just the tip of the iceberg. Complying with ICANN's regulations and participating in the organization's bureaucratic processes will cost governments and corporations (and thus taxpayers and consumers) around the world at least another $20 million to $30 million annually. Of course, to cover these costs ICANN can always decide to hike the tax or impose more regulations in the future, just as the Gore Tax has been doubled without any representation.

Reportedly, ICANN has maintained that the $1 tax on domain name holders is merely a user fee and not a tax. User fees are charged at times for the provision of a service, but what service is ICANN providing to users? ICANN provides no service. This is an arbitrary cost imposed on a business transaction that is used to fund regulators, administrators and bureaucrats mostly based in Europe. That sure sounds like a tax- of course King George probably didn't really believe that a "fee" placed on tea was a tax either.

Humorously, I found, ICANN attempted to defend itself by asserting that the National Park Service raises fees on admission to parks without a cry of taxation. Well, first, those so called fees are merely a tax by another name, admittedly aimed at those who use the park system, but a tax nevertheless. Second, ICANN's response causes me even greater concern in that again we find the organization using a governmental agency as a role model. On the one hand they say they have no governmental power and yet, on the other hand, they continuously assert their ability to take actions that at least appear quasi-governmental. In fact, in this defense we see that the best example they can give to justify their actions is of a governmental agency. From where does this power derive? And did the congress approve of the handing out of this congressional power to tax?

As you investigate the remarkable quasi-governmental reach of ICANN, please also consider that this tax is the camel's nose. Always keep firmly in mind that this new Internet tax has not been approved much less reviewed by congress. This combination is damaging to taxpayers and ultimately to the fundamental guarantees, constitutional guarantees, of citizenship.

Now, I have read that ICANN has finally responded to the many concerns that have been raised by many who have been following the domain name issue. I, for one, am not impressed. We should all carefully consider what they have said, which is not much. ICANN has stated that it would "defer collection" of the $1 tax it imposed on new domain name registrations. The message has clearly not been received by this organization - defer collection does not equate in any way to a statement that they will not collect. Moreover, they apparently have yet to realize that only Congress has the power to tax, yet they plow forward.

One other issue causes me some concern as ICANN has continued its activities. Some will raise the alarm of international interests invading the U.S. to the detriment of our best interests. In this case, those voices may be correct. ICANN boasts that it is made up of several international interests as the domain name is an international issue. What has been lost in the rhetoric is the simple fact that it was in the U.S. that the domain name got used as a way to direct web users. Why do we want to arbitrarily export our ideas so that foreign interests begin controlling a U.S. invention? More importantly, why would we allow foreign interests to decide how a totally privatized domain system is to be developed? Worse, why are foreign interests having a deciding voice in how to tax U.S. citizens?

Reason for Optimism?

Despite my noted skepticism of the ICANN process Mr. Chairman, notably I am somewhat encouraged by the recent Department of Commerce response to the Chairman Bliley suggesting the following changes to the ICANN structure:

ICANN's top priority must be completing the work necessary to put in place an elected board of directors on a timely basis. Specifically, it must do everything within its power to establish the Supporting Organizations, and ensure the election of nine board members by those Organizations to begin serving at the November 1999 Board Meeting. And it must work diligently to complete the process for electing at-large directors by June 2000. (Page 11 of the response)

ICANN should eliminate the $1 per-year per domain name tax. We believe a permanent financing method should not be adopted until after the nine elected members are added to the ICANN Board in November. That will ensure that this important decision is made in accordance with the representative, bottom-up process called for in the White Paper. In the meanwhile, we will work with ICANN and the entire Internet community, to the extent permitted by law, to obtain interim resources for ICANN. (Page 11 of the response)

ICANN should immediately open its board meetings to the public. Transparency is critical to establishing trust in decision making. And trust is essential for ICANN's ultimate success. As a general matter, ICANN has undertaken the vast majority of its work in an open and transparent manner. The final step of opening the board meetings is critical to establishing trust in ICANN. (Page 12 of the response)

There is concern in the Internet community about the possibility of over-regulation, and therefore ICANN should assure all registrars and registries, through contract, that it will restrict its policy development activities to matters that are reasonably necessary to achieve the goals specified in the White Paper and that it will act in accordance with the procedural principles set forth in the White Paper. (Page 17 of the response)

Reason for Pessimism

As I noted, I am encouraged by each of these suggestions. Each of these issues is a critical first step to making ICANN work. However, they are just suggestions. Nothing has been changed. In order to implement these modifications into the process then ICANN must adopt them into their bylaws.

Despite my optimism over the Department of Commerce's suggestions, I am deeply troubled by the following section of the Department of Commerce's response to Chairman Bliley:

The White Paper stated that the new not-for-profit corporation should be funded by Internet stakeholders, including registries and registrars. ICANN concluded that it should initially finance its operations through a payment by registrars of a user fee of $1 per year per domain name registered. This payment obligation was included in the accreditation agreement formulated by ICANN after notice, opportunity to comment, and a public meeting. (12)

In recent weeks the user fee has become controversial. Although the $1 fee may be determined to be an appropriate method for funding ICANN activities, and we believe such a fee would be lawful, (13) we believe that ICANN should eliminate the fee. Adopting a permanent financing system is an important step that, we believe, should await the addition of the nine elected Directors in November. That will ensure that this important decision is made through a representative, bottom-up process.

To date, ICANN has been funded through corporate contributions and extensions of credit. In the short term our recommendation means that ICANN must receive government funding, continue to rely on corporate contributions, or finance itself through some combination of both sources. We pledge to work with ICANN and the entire Internet community, to the extent permitted by law, to secure interim resources for ICANN.

Americans for Tax Reform resistance of the proposed ICANN taxation without representation pales in comparison to our opposition to ANY plan by the Department of Commerce to use federal funds to support this organization. I am deeply troubled by the Department's pledge to use "government funding." That taxpayer money be used to support ICANN is an anathema. A portion of our taxes may legitimately be called an Internet tax at that point as everyone in the country would be taxed to support an organization of questionable authority, that adamantly defends its power to meet without the taxpayers gaining the benefit of sunshine. Americans for Tax Reform will work diligently to block any such initiative and urges each of you to voice your concerted displeasure with this approach.

ATR's concern over any effort to fund ICANN with taxpayer money is amplified by a report release last Friday on CNN on ICANN. The report located at http://cnn.com/TECH/computing/9907/16/icannt.idg/ spells out what I think each Member of Congress should find shocking. In this CNN article, ICANN announced that it was one (1) million dollars in debt. In fact, the original funds raised from the Internet industry around $500,000 were gone almost instantaneously. ICANN's General Counsel Joe Simms said in the article "The $421,000 that came in the door ran out a long time ago," Simms stated. "We're well over $1 million in the hole."

Now it should come as little surprise that Americans for Tax Reform would be opposed to a government bailout of an organization that in the course of seven months has spent a million and half-dollars and essentially done nothing. In fact the suggested modifications from the Department of Commerce are as clear an indication as any that ICANN deserves serious Congressional scrutiny. However before the full light of day can be shed on this process, ICANN is passing the hat once again. Only this time the Department of Commerce has indicated it may be willing to pick up the tab.

The proposed ICANN 5.9 million dollar annual budget, to be collected from domain name registrants for the limited technical oversight of the domain name system, strikes me as excessive. Now comes the idea that tax payer dollars should be spent to host lavish receptions and secret board meetings in five star hotels in Singapore, Berlin and Santiago for nine un-elected and unaccountable ICANN Board members is a travesty. ICANN has now agreed to open its next board meeting in Santiago, Chile. However, a decision on future meetings has been deferred. This organization really wants to live by its own rules - have the power to tax, fly around the world at taxpayers expense, grant foreign interests the power to determine, in part, the direction of the U.S. electronic economy, and still meet in secret.

The fact that the Department of Commerce is signaling a willingness to fund the ICANN jet setters is a disturbing indication that its intent may not match the will of American taxpayers, Internet citizens globally and, increasingly, the U.S. Congress. The expectation that you or I would be on the hook to pay for a dubious organization's member's room service would be laughable if it weren't happening before our very eyes. The American taxpayer footing the bill for an organization that portends to be the rightful heir to control over the Domain Name system but yet cannot seem to control its own financial responsibilities is a seriously flawed premise.

Americans for Tax Reform are committed to ensuring that any further discussion or debate concerning the expenditure of taxpayer funds of ICANN be fully examined in Congress so that the various constituencies and public may have appropriate inspection. We call for your committee to fully explore the expenditures of ICANN and demand a full accounting of these activities.

It is this exact spirit that Americans for Tax Reform led the effort last week to overturn the United Nations proposed Internet tax. The UN recognized that Internet users will likely grow from 150 million this year to roughly 700 million in 2001 and is looking to find a taxing mechanism to fund its agenda. Unfortunately, Vice President Albert Gore has a record of supporting such commerce taxes for his agenda, i.e. the Gore tax. This has legitimized the most recent United Nations decree. We continue to urge Vice President Gore to join Congress and act decisively in rejecting his liberal tax and spend history, and for that matter to sign the Taxpayer's Protection Pledge and make the promise to every citizen that he will not raise taxes.

ATR's efforts involving the UN Internet Tax and ICANN are consistent. Any effort to globally apply taxation without representation and fund an already bloated bureaucracy and an unaccountable secretive board are troubling to say the least. By some accounts the Internet will support nearly a trillion dollars of electronic commerce within a few short years and it is clear that American ingenuity and technological prowess has driven the Net's explosion. To suddenly turn the keys of control over to an organization that seeks to burden the very people responsible for its growth is preposterous. ATR seeks to have all the issues surrounding ICANN fully vetted before the U.S. Congress and the court of public opinion. Too much is riding on the decisions made by this body and the Congress needs to understand fully not only what will happen but what has happened.

About Americans for Tax Reform

Since 1986, ATR has sponsored the Taxpayer Protection Pledge, a written promise by legislators and candidates for office that commits them to oppose any effort to increase the federal income taxes on individuals and businesses. At present, 207 U.S. Representatives and 42 U.S. Senators have signed the pledge.

ATR also works with state taxpayer coalitions in all 50 states to ask candidates for state legislature and governor to sign the STATE TAXPAYER PROTECTION PLEDGE which reads: "I (name) pledge to the taxpayers of the (district #) district, of the state of (state), and to all the people of this state, that I will oppose and vote against any and all efforts to increase taxes." So far, 1,136 state legislators and eight governors have signed the pledge.

ATR leads the fight against the Value-Added Tax (VAT), a European style national sales tax that can raise revenue while being mostly hidden to taxpayers. The VAT has been instrumental in the growth of the European-style welfare state. Today, 178 members of Congress are members of the Congressional Anti-VAT Caucus, co-chaired by House Majority Leader Dick Armey and House Majority Whip Tom DeLay.

Americans for Tax Reform strongly supports the concept of a single rate flat tax, such as that introduced by Rep. Dick Armey as the "Freedom and Fairness Restoration Act."

In addition to the above activities, ATR sponsors the calculation of Cost of Government Day, the day on which Americans stop working to pay the costs of taxation, deficit spending, and regulations by federal and state governments. The cost of federal regulation alone comes to nearly $700 billion, $5,000 per household per year, more than the revenue raised by the personal and corporate income taxes combined.

ATR serves as a national clearinghouse for the grassroots taxpayers' movement by working with approximately 800 state and county level groups. ATR is a non-profit, 501c(4) lobbying organization. Contributions to Americans for Tax Reform are not tax deductible. The Americans for Tax Reform Foundation is a 501c(3) research and educational organization. Memberships begin at $25.00 and all contributions to the Foundation are tax deductible.