Katie McAuliffe

Circus at the Antitrust Hearing

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Posted by Katie McAuliffe, Laurel Duggan on Thursday, July 30th, 2020, 3:03 PM PERMALINK

Congressional hearings of tech CEOs Sundar Pichai (Google), Jeff Bezos (Amazon), Mark Zuckerberg (Facebook), and Tim Cook (Apple) devolved into an hours-long circus as Democrats used the opportunity to create reelection campaign fodder.

The purpose of this hearing was to investigate alleged anticompetitive behaviors of dominant tech companies. About 25% of the questioning was somewhat related to antitrust policy—and this is a generous estimate. The remainder of questions revolved around partisan talking points like online hate speech, YouTube radicalization, and conservative censorship.

Antitrust law under the consumer welfare standard is designed to protect consumers from harm by monopolistic companies, not to protect companies from each other. None of the companies called before the Antitrust Subcommittee can be considered monopolies. Each one of them competes with other companies, tech or otherwise, both small and large, for revenue. And they are not using their strong positions in the market to harm consumers. Rather, they have each been using their resources to provide better products and slash prices.

Representative Armstrong (R-N.D.) wisely noted the harms of sweeping expanses of government power targeting certain companies, rather than going through the Federal Trade Commission’s already existent enforcement authority under the consumer welfare standard that operates on a case by case basis:

“When we try to hurt large companies, we entrench large actors and lock out new, smaller competitors."

On the rare occasion that Democrats’ questions were related to antitrust, the line of questioning belied the entire premise of the hearing: that concentration in tech is harming consumers. Time and time again, members of Congress asserted that Amazon and Facebook’s competitive strategies were harming their competitors by driving down prices. But the purpose of antitrust is to protect consumers, not competitors.

The mere fact that Apple was called to testify tells us that the hearing is not about antitrust; the hearing is about anger. Anger at tech for a number of reasons, but mostly because they are big.

Apple is in no way a violator of competition policy. Their primary business is hardware and software, not advertising, not data. They only hold 20% of the smartphone market13% of the personal computer market, and 28% of the tablet market. Tablets are the only personal device market in which Apple is dominant, and their share of that market is shrinking. As for operating systems, Android has more than double the market share as compared to Apple.  

“Apple does not have a dominant market share in any market where we do business. That is not just true for iPhone; it is true for any product category." ~Tim Cook

Apple created the entire App environment. Rather than keeping it as a closed system, they allowed individuals to create Apps which, once in line with certain conditions that provide security and support, can be downloaded by anyone on the App store. Some have complained that Apple’s App store discriminates against Apps that are not its own, but that opinion can’t be held for very long after looking into Apple’s policies, which they are very transparent about.

If Apple is a gatekeeper, what we have done is open the gate wider. We want to get every app we can on the Store, not keep them off.” ~Tim Cook 

In a particularly misguided line of questioning, Rep. Cicilline (D-R.I.) harangued Jeff Bezos for Amazon’s treatment of third-party sellers. “You say Amazon is only focused on what’s best for the customer. How is that possible when you undercut your prices and compete directly with third-party sellers?” Rep. Cicilline sees a conflict of interest between hosting outside retailers and offering low prices to consumers. He somehow fails to see that the diversity of retailers on Amazon drives down their prices, making products cheaper for consumers. 

Rep Cicilline went on to accuse Amazon of a litany of abusive business practices against retailers on its own site. He, along with several other members of Congress, claimed that Amazon exploited the small businesses it hosts through predatory pricing, and claimed that these businesses had no option other than Amazon.

There are 1.7M small & medium-sized businesses selling in Amazon’s stores. 200,000+ entrepreneurs surpassed $100,000 in sales in our stores in 2019. We estimate that third-party businesses selling in Amazon’s stores have created over 2.2M new jobs. ~Jeff Bezos 

In reality, Amazon has to compete with all retail, including Target, Costco, Kroger and Walmart, in addition to numerous online platforms that host third-party retailers, including Etsy, Facebook Market, EBay and Google Shopping. Even if this wasn’t the case, Amazon would have no obligation to host retailers on its privately-owned platform, and retailers have no obligation to use their services.

Like any retailer, Amazon could have chosen to keep their stores a closed system, selling only their own products. Instead, they opened the platform to hundreds of thousands of third-party retailers, many of whom are small businesses.

20 years ago, we welcomed 3rd-party sellers into our stores & enabling them to offer their products alongside our own. We didn’t have to invite third-party sellers into the store. We could have kept this valuable real estate for ourselves.” ~Jeff Bezos

Rep. Raskin (D-Md.) complained that Amazon’s Alexa was a monopoly, since it holds a 60% share of the smart speaker market. But if you define any market this narrowly, you’ll find monopolies everywhere you look. If you define your neighborhood as a market, your local gas station is a monopoly. Of course, Alexa devices compete in a much broader market than that; the device competes with smartphones, tablets, and personal computers, all of which conduct most or all of the same functions.

Rep Jayapal (D-Wash.) and Rep. Neguse (D-Colo.) both incorrectly called Facebook a monopoly. Not only is Facebook not a monopoly, they are not even the dominant firm in their market—the largest social media platform is YouTube. Additionally, Facebook’s primary revenue source is advertising. They aren’t dominant in that market either; Google beats them out by a wide margin.

In many areas, we are behind our competitors. The fastest growing app is #TikTok, and the largest messaging app is iMessage.” ~ Mark Zuckerberg

To provide one example, the cost of online advertising has plummeted 40% in the last decade. If Google has monopolistic power in the advertising realm, why aren’t they raising prices? The obvious answer is that there is robust competition in online advertising. Google competes with Facebook, Twitter, Pinterest, Comcast, and countless others for ad revenue. 

“Competition in ads — from Twitter, Instagram, Pinterest, Comcast & others — has helped lower online advertising costs by 40% over the last 10 years, with these savings passed down to consumers through lower prices.” ~ Sundar Pichai 

Democrats were also hostile to acquisitions and mergers, which they claimed were harmful to both consumers and competitors somehow. Rep. Neguse questioned Zuckerberg about acquisitions, condemning how successfully Facebook had acquired and improved various products and services. Never mind that these acquisitions improved the apps’ privacy and security features while making more apps free to the public. If the success of American businesses makes Democrats uncomfortable, then by all means we should let them weaponize antitrust law to beat private businesses into submission.

Those who want to expand government power favor a narrow definition of tech markets because they have no real evidence in terms of demonstrable consumer harm or rising prices. It allows them to build an antitrust case out of bitterness, and little else.

The presence of four companies—all of which compete with each other—should be sufficient evidence that there is no risk of monopolization. Competition in tech—from hardware to software to advertising—is robust. 

Photo Credit: POMED


The 4th Amendment is a Right - No Need to EARN IT

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Posted by Katie McAuliffe, Laurel Duggan on Monday, July 27th, 2020, 2:44 PM PERMALINK

It is easy for those in power and the broader public to see new technologies—the telephone, email, cloud storage, or end-to-end encryption—as somehow exempt from the privacy laws which govern other communications. But as technologies become more widely used for business and personal communication, we all come to understand the need to protect our interactions from surveillance.

Encryption is not a force for evil. It is used by businesses across the country to prevent online attacks and theft. It is common practice for hackers to target retailers in the U.S. to steal customer data and access their bank accounts, but attacks like these are largely impeded by encryption. When hackers stole the banking information of millions of customers in Target’s infamous data breech, the victims’ bank accounts were protected because their PINs were encrypted.

Encryption also promotes innovation. Businesses and individuals have little incentive to create and discover if their intellectual property will simply be stolen by criminals or foreign actors.  Innovation requires protection of proprietary data.

Building in a systemic weakness, while it may make law enforcement’s job easier, does not make anyone safer. Creating backdoors for law enforcement to get around encryption would weaken the technology as a whole; backdoors can be exploited by criminals to access users’ personal data.

The tension between the Fourth Amendment and Law Enforcement goals is not new and is important to preserve. Officials claim that encrypted data is “warrant-proof,” but this misrepresents the purpose of a warrant. Search warrants allow law enforcement to search for evidence, but do not guarantee that they will find evidence supporting or leading to any conclusions.

Encryption doesn’t just protect us from criminals; it protects us from the prying eyes of the government. The FBI has waged a years-long battle against encryption, which it views as an impediment to investigations. The federal government has been intercepting electronic communications for as long as it has been possible; federal agents began wiretapping phone calls in the 1920s. It tends to take the government years to adjust to changes in communications technology; it took decades for the Supreme Court to place limits on warrantless electronic surveillance.

Following years of unsuccessfully pressuring tech companies to give the government a backdoor to encrypted data, Congress and the Department of Justice changed their strategy. A high profile letter sent by U.S. intelligence agencies and numerous international allies linked end-to-end encryption with child sexual exploitation, claiming that Facebook would be harming children by offering encryption on its messaging services.

Reframing the encryption debate around the most heinous crimes imaginable is dishonest; it posits that, because criminals use their privacy to exploit the most vulnerable people in society, no one has a right to privacy. This line of thinking also presupposes that Big Brother is unfailingly benevolent; the FBI will have a backdoor to all online communications, but not to worry: they will only spy on you if you deserve it.

In a misguided attempt to address the very real problem of online child exploitation, Senators Lindsey Graham (R-S.C.) and Richard Blumenthal (D-Conn) introduced the EARN It Act. The legislation has honorable goals, but in practice would limit the ability of tech firms to offer encryption to users. This would restrict the ability of all Americans—including survivors of abuse—to protect their privacy and personal safety while online.

After a firestorm of criticism from across the political spectrum, the Senate Judiciary Committee approved a manager’s amendment to the EARN It Act. The amendment resolves the aspects of the original bill that would have threatened encryption most seriously: businesses cannot be held liable simply for failing to take actions that would undermine encryption services, and offering encryption will not be automatic grounds for liability for child sexual abuse material (CSAM). Critics point out that the amendment provides only a defense against liability, not immunity; the threat of litigation will still be sufficient to discourage tech companies from providing secure end-to-end encryption.

The amendment removes the legal authority initially granted to the commission created in the bill; the commission’s standards will be recommendations, not legal requirements. It also extends the amount of time that providers can preserve the contents of a report, which will help with the development of algorithms made to detect CSAM. 

However, the manager’s amendment brings a new set of problems to the table. It allows states to penalize companies with both civil and criminal liability. In addition to balkanizing the legal landscape for a business model that naturally crosses state lines, this would leave American tech businesses vulnerable to a firehose of destructive lawsuits. Endless litigation would likely lead to the end of America’s global leadership in tech. 

The amendment also revokes tech companies’ liability protection based on “actual knowledge” of the existence of CSAM. This is a step up from the “recklessness” standard in the earlier version of the bill, but it still creates perverse incentives that discourage tech companies from investigating CSAM. When knowledge triggers liability, companies will avoid learning about potential CSAM cases. This will lead to less, not more, action by tech companies to stop the spread of CSAM.

The ability to use privacy services provided by a private business is part of what makes our country great and distinguishes us from authoritarian countries like China, where the government is entitled to the private data of citizens. Efforts by the government to weaken encryption should raise red flags and inspire a continued effort to protect encryption.

Photo Credit: Jonathan McIntosh


Coalition Supports Digital Goods and Services Tax Fairness Act

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Posted by Katie McAuliffe on Tuesday, July 21st, 2020, 4:33 PM PERMALINK

Americans for Tax Reform has released a coalition letter with 19 signers supporting the Digital Goods and Services Tax Fairness Act. The full letter can be read below, and here.

 

Support S. 765 & H.R. 1725 the “Digital Goods and Services Tax Fairness Act of 2019”

Dear Majority Leader McConnell, Minority Leader Schumer, Speaker Pelosi, and Republican Leader McCarthy,  

We urge you to support the Digital Goods and Services Tax Fairness Act of 2019, introduced by Senators John Thune (R-SD) and Ron Wyden (D-OR) and Representatives Steve Cohen (D-TN) and John Ratcliffe (R-Texas) as S. 3581 and H.R. 7058 respectively. This legislation would set up a framework for states to prevent duplicative and discriminatory taxation on the digital economy, if and only if, a state chooses to tax such commerce.

It is important to clarify that this bill would not mandate any state to tax a digital good or service, nor would it establish any sort of national sales tax on digital commerce. The framework provides legal certainty for how and when state and local taxes can be applied to the digital economy. The state in which a customer legally resides would determine the tax status of the digital transaction. It would also eliminate confusion for consumers and businesses by ensuring the taxation of a digital song or software downloads is the same as the tax rates imposed on music or software CDs purchased at the local store.

Given the unique way digital commerce is transacted, it is currently possible for multiple states to claim the right to impose taxes on a given digital transaction, leaving the consumer potentially subject to multiple and duplicative taxes. Congress has previously addressed a very similar disruptive tax situation with the use of mobile phones by clearly identifying which state has the right to tax wireless services. The existing state laws governing interstate commerce are outdated to the point where they cannot adequately address the complexities that surface in digital sales. Considering how rapidly the digital market is growing, the need for this legislation is imperative to provide a clear roadmap for states to follow, if they so choose, to fairly impose taxes on digital goods and services in today’s new economy.

This bill would also prevent discriminatory state and local taxes that single out digital goods and services merely because they are transmitted over the internet. Right now, states can choose to impose higher tax rates on digital subscriptions than are imposed on physical subscriptions. For example, a state could tax an online newspaper subscription at 5% and a physical subscription at 3%. If a product is subject to tax collection, it should not matter whether it is received digitally. This type of tax discrimination unfairly penalizes people participating in the digital economy.

Accordingly, we urge you to enact the Digital Goods and Services Tax Fairness Act of 2019 before the end of this Congress.

 

Respectfully,

 

Grover G. Norquist

President

Americans for Tax Reform 

 

Lisa B. Nelson

CEO

ALEC Action

 

Steve Pociask

President / CEO

American Consumer Institute

 

Ryan Ellis

President

Center for a Free Economy

 

Andrew F. Quinlan

President

Center for Freedom and Prosperity

 

Curt Levey 

President

Committee for Justice

 

Matthew Kandrach

President

Consumer Action for a Strong Economy

 

Tom Shatz

President

Council for Citizens Against Government Waste

 

Katie McAuliffe

Executive Director

Digital Liberty

 

George Landrith

President 

Frontiers of Freedom

 

Mario H. Lopez

President

Hispanic Leadership Fund

 

Bartlett Cleland

Executive Director

Innovation Economy Institute

 

Andrew Langer

President

Institute for Liberty 

 

Seton Motley

President

Less Government

 

Pete Sepp

President

National Taxpayers Union

 

Karen Kerrigan

President & CEO

Small Business & Entrepreneurship Council

 

David Williams

President

Taxpayers Protection Alliance

 

James L. Martin

Founder & Chairman

60 Plus Association

 

Saulius “Saul” Anuzis

President

60 Plus Association

Photo Credit: Marco Verch


Coalition Opposes SCRIPT Act

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Posted by Katie McAuliffe on Wednesday, July 15th, 2020, 1:39 PM PERMALINK

Americans for Tax Reform has released a coalition letter with 16 signers opposing the SCRIPT Act. The full letter can be read below, and here

 

July 15, 2020

RE: Stopping Censorship, Restoring Integrity, and Protecting Talkies Act, SCRIPT Act, S. 3835

Dear Senators:

Conservatives and libertarians are rightly concerned about censorship. While we must be zealous in guarding our 1st Amendment rights at home, conservative and libertarian leaders are also right to be deeply concerned about totalitarian regimes around the world and the restrictions they impose on freedom of thought -- from the Great Firewall of China to social media censorship in the Middle East to Russian threats to freedom of the press.

As a part of this justified vigilance, some have expressed concerns that China’s role in American filmmaking may result in censorship that extends even beyond China’s borders. This worry is most clearly expressed in S.3835, the SCRIPT Act, introduced by Senator Ted Cruz. 

The SCRIPT Act would sever all federal government cooperation for at least three years with any production company found by the Department of Commerce to have edited a film for any reason, no matter how innocuous, in order to exhibit it in China. 

While we share the Senator’s concern with reports about Chinese censorship of American films, we think this legislation will do more harm than good for two main reasons: first because the remedy suggested would have a negative effect on the interests of the US military, and second because the legislation itself uses as its remedy the application of a government penalty toward artists, which ironically would impinge at least on the spirit of our freedom of expression.

Filmmakers rely on cooperation with the government for basic production needs – not just access to fighter jets and battleships. For example, filming with drones is subject to Federal Aviation Administration rules, and filming on public lands requires permits from the Department of the Interior. These and other unglamorous – but commonplace and vital use cases – would be jeopardized by the SCRIPT Act.

The military’s involvement with Hollywood is not guaranteed. The DoD regularly denies requests from filmmakers to allow access to bases, training or equipment. However, sometimes the DoD does choose to assist in filmmaking and when it does, it is reimbursed for its time and provides valuable portraits of American military achievements that are both more realistic and engaging for audiences, while safeguarding classified or sensitive information. These accurate but vetted depictions, and the resulting favorable treatment of the US military, benefit our military recruitment and is conducive to fostering an American culture that looks favorably on military service. Withholding this cooperation for any reason would not be in the interests of the United States military.

It should also be considered that this bill itself ironically directs government action regarding the decisions filmmakers make on the cutting room floor. Bringing this coercion, however mild, and for whatever reason, to bear on this process from the United States seems ill-advised in our effort to tear down the walls of censorship erected by totalitarian regimes. 

China admits very few films into its market, but when it does, scenes that many Americans take for granted - plentiful grocery stores, assembled protests, university experiences, dinners out - present the benefits of democracy and capitalism in ways that are both understandable and relatable to international audiences. These scenes have been effective historically in influencing populations around the globe, for example in the former Eastern Bloc. 

These new regulations would handicap one of America’s leading export industries into all international markets, including regimes practicing censorship, to the benefit of their foreign competitors. Today, the U.S. film and television industry accounts for a $9.4 billion trade surplus, more than telecommunications, transportation, insurance, or health services. This policy would ultimately weaken America in the long-term economic competition with our international rivals.

Censorship internationally is a legitimate concern and we support efforts to address these issues. However, solutions should honor American free-market and limited government principles. It is China, after all, that routinely intrudes on the private dealings of business and suppresses private sector success.

We respectfully oppose the SCRIPT Act, and instead suggest lawmakers focus on stronger more direct solutions to the economic, cultural and geopolitical challenges represented by China and other totalitarian regimes.

 

Sincerely,

 

Grover Norquist

President

Americans for Tax Reform

 

Phil Kerpen

President

American Commitment

 

Krisztina Pusok

Director of Policy Research

American Consumer Institute

Center for Citizen Research

 

Andrew F. Quinlan

President

Center for Freedom and Prosperity

 

Jeffrey Mazzella

President

Center for Individual Freedom

 

Ashley Baker

Director of Public Policy

The Committee for Justice 

 

James Edwards

Executive Director

Conservatives for Property Rights

 

Matthew Kandrach

President 

Consumer Action for a Strong Economy

 

Thomas Schatz

President

Council for Citizens Against Government Waste

 

Katie McAuliffe

Executive Director

Digital Liberty

 

Hance Haney

Senior Fellow

Discovery Institute

 

George Landrith 

President & CEO

Frontiers of Freedom

 

Mario H. Lopez

President

Hispanic Leadership Fund

 

Tom Giovanetti

President

Institute for Policy Innovation

 

Brandon Arnold

Executive Vice President

National Taxpayers Union

 

David Williams

President

Taxpayers Protection Alliance

Photo Credit: Vincent Diamante

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ATR Supports Reconfirmation of Mike O'Rielly to FCC

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Posted by Katie McAuliffe on Tuesday, June 16th, 2020, 2:45 PM PERMALINK

​​​​​ATR President Grover Norquist has released a letter in support of the reconfirmation of Commissioner Michael O’Rielly to the Federal Communications Commission.

 

June 16, 2020

The Honorable Roger F. Wicker

Chairman United States Senate Committee

on Commerce, Science, and Transportation

555 Dirksen Senate Office Building

Washington, DC 20510

 

Re: Support of Nomination of Michael P. O’Rielly, Federal Communications Commission

Dear Chairman Wicker & Member of the Senate Committee on Commerce, Science and Transportation.

I write in support of Michael O’Rielly’s re-nomination to the Federal Communications Commission.

Since his first nomination in 2014, he has proven his commitment to American leadership in communications. He has a strong record of defending American interests globally and promoting economic development domestically, and his leadership will be essential to American efforts to win the race to 5G in the coming years. 

Free market principles and American leadership have been central to Commissioner O’Rielly’s work at the FCC. He has successfully pushed to make more C-Band spectrum commercially available, allowing the United States to come out ahead of China in the race to 5G. This is of vital importance both economically and in terms of national security. He also been a leader in many other spectrum proceedings, including TV white spaces, 6 GHz, 5.9 GHz, and 900 MHz.

Commissioner O’Rielly’s regulatory policy is grounded in Constitutional principles. He has promoted regulatory modernization efforts which emphasize economic freedom and limited government. Regulatory reform efforts have facilitated broadband expansion across the United States and allowed our industries to become globally competitive. The success of these efforts had been evident throughout the COVID-19 crisis, as our networks supported record internet traffic. Commissioner O’Rielly’s work in recent years set up our country for a rapid transition to telehealth, remote work, and distance learning.

While at the FCC, Commissioner O’Rielly has reduced waste and fought against corruption, abuse, and fraud. He demanded increased accountability from the International Telecommunication Union, shed light on states’ misuse of 911 funds, and drew attention to the abuse of the USF Lifeline Program.

Among the commissioner’s most important achievements at the FCC is his fight against the misuse of 911 funds by state governments. Several states habitually diverted money from 911 funds to pay for unrelated expenses in violation of the law. The abuse was egregious, with New Jersey diverting over 90% of its 911 funds to its general fund. Corruption on this scale damages public safety and erodes the public’s trust in our institutions. By shedding light on this issue, Commissioner O’Rielly has proven his commitment to fighting corruption and advancing government transparency.

Commissioner O’Rielly has proven himself to be a principled and effective leader. He has a vital role to play in the implementation of 5G and the modernization of communications regulation in the coming years. Americans for Tax Reform urges the reconfirmation of Commissioner O’Rielly to the FCC. 

 

Onward,

Grover Norquist
President, Americans for Tax Reform

 

Photo Credit: Gage Skidmore

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Senate Fails to Adopt Compromise Cryptocurrency Amendment

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Posted by Katie McAuliffe, Bryan Bashur on Monday, August 9th, 2021, 5:39 PM PERMALINK

Americans for Tax Reform was disappointed to see the Senate fail to adopt the compromise cryptocurrency amendment (No. 2656) filed by Senator Pat Toomey (R-Pa.) that would have significantly improved the tax reporting requirement provisions in the bipartisan infrastructure bill. 

Grover Norquist, President of Americans for Tax Reform, stated:

Cryptocurrencies should never have been put up as a pay-for in the infrastructure package. It was creative accounting in the part of the White House to try and pay for part of their spending spree. Now an entire industry which should be thriving in America is threatened by IRS agents and requirements to access private information.

It is very concerning that senators could not agree to common sense language on cryptocurrencies. It’s clear legislation, especially on emergent technologies, should go though regular order rather than being hidden in a massive package.

This afternoon, Sen. Toomey asked for unanimous consent to include the amendment in the infrastructure package. This afternoon, Sen. Toomey asked for unanimous consent to include the amendment in the infrastructure package. Unfortunately, objections by other senators prevented the amendment from being adopted. In particular, Senator Bernie Sanders (I-Vt.) blocked the amendment because it would have been paired with Senator Richard Shelby’s (R-Ala.) amendment to increase defense spending. 

The compromise amendment was an agreement between Senators Toomey, Cynthia Lummis (R-Wyo.), Rob Portman (R-Ohio), Mark Warner (D-Va.), and Kyrsten Sinema (D-Arizona) to narrow the definition of a broker for digital assets for reporting tax information to the Internal Revenue Service (IRS). While not perfect, the amendment was a significant improvement from the language in the base text of the package. 

We encourage members of the House of Representatives to fix the language in the base text and look forward to working with them in this endeavor. The last thing the United States government needs to do is regulate the cryptocurrency market to the point where the industry leaves the United States entirely.

Photo Credit: John Williams

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Crypto’s Taxing Predicament

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Posted by Katie McAuliffe, Bryan Bashur on Friday, August 6th, 2021, 2:07 PM PERMALINK

The fight over the cryptocurrency tax reporting provision in the bipartisan infrastructure bill just got a lot more interesting. 

After Senator Rob Portman (R-Ohio) publicly announced he supported a vote on Senator Wyden (D-Ore.), Toomey (R-Pa.), and Lummis’ (R-Wyo.) amendment (No. 2498), he switched gears and filed his own amendment with Senator Warner (D-Va.). Industry leaders and trade associations such as the Blockchain Association, Coinbase, and Coin Center have publicly supported the changes in Wyden-Lummis-Toomey but oppose Portman-Warner. 

As currently drafted, the infrastructure bill would jeopardize the cryptocurrency and blockchain industry’s future in the United States. 

The provision titled “Enhancement of Information Reporting for Brokers and Digital Assets” would likely lead to a host of unintended consequences, not only for the technology’s ability to operate in the United States but also for the privacy rights of all Americans. The last thing the United States government needs to do is regulate the cryptocurrency market to the point where the industry leaves the country entirely. Totalitarian regimes such as the Chinese Communist Party have already kicked out Bitcoin miners much to the benefit of states like Texas who welcome all kinds of business. 

The cryptocurrency language in the bill was hastily thrown together in an act of desperation to pay for its large expenditures. The Congressional Budget Office’s announcement that the bipartisan bill would increase the federal deficit by $256 billion over 10 years underscores the lawmakers’ desire to shore up additional revenue, much to the dismay of the cryptocurrency ecosystem. 

The Joint Committee on Taxation estimated that the language in the bill would raise approximately $28 billion in revenue. ​This is curious since cryptocurrency brokers already report to IRS, so its hard to see where JCT is deriving these new numbers from.​

The Wyden-Lummis-Toomey Amendment addresses a significant concern in the underlying bill. The amendment removes the obligation of network participants, such as miners and software developers, who don’t have—and shouldn't have—access to customer information to report tax information to the Internal Revenue Service. It does so without affecting the reporting obligations placed on brokers and traders of digital assets.

On the other hand, the Portman-Warner Amendment excludes proof-of-work mining and blockchain validators. However, the amendment makes no mention of software developers, node operators, and aggregators thus requiring them to report to the IRS. ​Interestingly, singling out proof-of-work only exempts one technology and does not allow blockchain technology to continue to innovate in the US. These technologies are changing, and the newer proof-of-stake technology is more energy efficient but would not be exempt in the Warner-Portman amendment. It's surprising that the White House and Democrats would put these kinds of limitations on the ability of technologies to become more energy efficient.

The White House has signaled their support for Portman-Warner in an effort to maximize revenue and crack down on digital asset tax avoidance. Unfortunately, this is par for the course for an administration that is obsessed with regulating digital assets all in the name of “investor protection”. 

Tomorrow, the Senate is expected to vote on both of these amendments. What the Senate should not do is be complacent and vote down both of the amendments. ​The Wyden-Lummis-Toomey amendment is best suited to clarify the definition of brokers for crypto purposes without unnecessarily exposing Americans' private information; however, allowing the language in the base text to pass without any changes will undoubtedly require numerous individuals in the cryptocurrency ecosystem to suddenly hand over information to the IRS that they do not possess. 

 

Photo Credit: QuoteInspector.com

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User Beware: Chinese Government Stockpiling Private Business Data

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Posted by Katie McAuliffe on Monday, July 26th, 2021, 1:50 PM PERMALINK

The increasing list of Chinese companies, particularly in the tech space, being reined in by the Chinese government should have US officials worried about more than just investing. It is now crystal clear that Chinese businesses must comply in all matters with the Communist Party: business leaders will be muzzled, data privacy is non-existent, and foreign owners’ have no property rights.   

After Chinese ride hailing company Didi’s tumultuous IPO, US senators called for SEC investigations as to whether Didi mislead the public, but the more revealing story remains the lengths to which China will go to exercise control over its companies and the data they keep.   

Chinese ride-hailing company, Didi, raised $4.4 billion by listing its shares on the New York Stock Exchange on June 30th, marking the biggest US IPO by a Chinese company since 2014. Shortly thereafter, on July 2nd and 4th, the Cyberspace Administration of China (CAC) rolled out orders to remove Didi from app stores and announced an on-sight probe that would also involve police, tax authorities, the market competition regulator, and regulators for natural resources and transport. This is the first time a government cloaked in secrecy publicly announced an investigation involving staff based within a company.  

By the following Wednesday, Didi's market value tumbled to $57 billion, down from nearly $70 billion on its first day of trading, prompting the senators’ calls for investigation.  

The CAC almost immediately announced similar investigations that also included blocking new user sign-ups into truck-hailing app Full Truck Alliance and recruiting app Boss Zhipin, both of which listed on the NYSE in June. No details publicly provided; the CAC only cited suspected violations of China’s national security and cyber security laws.  

While Didi may not operate in the United States it operates on a scale similar to Huawei internationally. In May 2021 testimony to the US-China Economic and Security Review Commission, Dr. R Evan Ellis of the US Army War College said “Didi’s advance in [Latin America], combined with the financial, positional, and other information collected on its clients, also presents a largely unrealized intelligence risk in the region on a scale similar to that presented by Huawei.”  

Didi’s privacy policies in Latin American (Argentina, Colombia, Chile, Mexico, Panama, PeruDominican Republic, Costa Rica, and Ecuador) state that personal data will be stored in the US—or any other part of the world where there is an entity controlled by Didi aka China. In other nations with close ties to America like BrazilJapanSouth AfricaAustralia and New Zealand, Didi’s privacy policy is minimal or non-existent. Mexican authorities have already called into question Didi data transfers with China and how that could affect their elected officials and foreign diplomats, as have Argentinian news organizations.  

China’s Measures on Automobile Data Security clarify that “important data” for the purposes of ride-hailing platforms, like Didi, include data on the flow of people and traffic in sensitive areas; data on aggregate traffic volume and flows; and any other data that Didi might collect that the government comes to determine is relevant to national security.  

That means all data stored by any Chinese company can and will be transferred to the Chinese government should the request be made.   

This is a serious risk to the US, our allies, and Americans abroad, especially American diplomats who might unwittingly be using these applications. Trip information includes locations, trip times and passenger information that can reveal private meetings and daily schedules linked directly to an individual’s financial data. Data gathered from trip information that is not anonymized and pooled in aggregate can paint a vivid picture of an individual or group’s habits and possible future patterns.   

While, Senators Marco Rubio (R-Fl.), Chris Van Hollen (D-Md.), Masha Blackburn (R-Tenn.), and John Kennedy (R-La.)  are right to question the IPO process, we should look even more carefully at the data stewardship of Chinese companies.  

China is not hiding their intentions either. State-run media are backing up the government’s actions saying “an internet giant absolutely cannot have a better command than the state of the super-database that is Chinese people’s personal data."    

This is not to say the US should in engage in full-scale data localization tactics. Cross border data flows remain important for general commerce and for a fully functioning internet, but as China continues to disrupt the playing field and becomes increasingly aggressive on data collection and localization, our elected officials should remain on guard.  

 

Photo Credit: Jordan Harrison

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Coalition Warns Against Broadband Proposals

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Posted by Katie McAuliffe on Friday, July 23rd, 2021, 3:52 PM PERMALINK

Americans for Tax Reform led a coalition with other center-right organizations flagging concerning developments in the infrastructure bill negotiations. Price controls and rate regulation; dramatic expansion of executive brand and agency authority; and government-controlled internet should never be on the table.

You can read the letter below or click HERE for a full version:

July 23, 2021

RE: Broadband Infrastructure Spending

Dear Senators:

We write to you today over some concerning developments in the bipartisan infrastructure negotiations on broadband. We are guided by the principles of limited government and believe that the flaws in the infrastructure framework go well beyond the issues discussed here. Nonetheless, our present aim is to advocate specifically against proposals that would enact price controls, dramatically expand agency authority, and prioritize government-controlled internet. 

The infrastructure plan should not include rate regulation of broadband services. Congress should not authorize any federal or governmental body to set the price of any broadband offering. Even steps that open the door to rate regulation of broadband services will prove harmful in the long run.  

Nor should Congress continue to abdicate its oversight responsibilities to executive branch agencies like the National Telecommunications and Information Administration. Giving NTIA unchecked authority to modify or waive requirements, renders all guardrails placed by Congress meaningless. There must be oversight of the programs to ensure that taxpayer dollars go toward connecting more Americans to broadband as opposed to wasteful pet projects. 

Historically, attempts by NTIA to close the digital divide through discretionary grants have failed, leading to wasteful overbuilds, corruption, and improper expenditures. The American Recovery and Reinvestment Act of 2009 created the $4 billion Broadband Technology Opportunities Program (BTOP) grant program administered by NTIA. From 2009, when BTOP was instituted, to 2017, at least one-third of all the reports made by the Inspector General for the Department of Commerce were related to the BTOP program, and census data showed that the BTOP program had no positive effect on broadband adoption. And this was with only $4 billion in taxpayer dollars. We cannot afford to make the same mistake with much greater sums.

Legislation must be clear and not create ambiguities that are left to the whims of regulators. While “digital redlining” is unacceptable, the FCC should not be allowed to define the term however it sees fit and promulgate any regulations it thinks will solve problems—real or imagined. Doing so would give the agency carte blanche to regulate and micromanage broadband in any way it desires. This would be an egregious expansion of FCC authority. Moreover, definitions and regulations could change whenever party control of the agency changes, leading to a back-and-forth that creates uncertainty for consumers and businesses. 

Legitimate desire to ensure that low-income Americans have access to broadband infrastructure should not be used as a smokescreen to codify aspects of the recent Executive Order on Competition, which should not be included in any bipartisan infrastructure agreement. Republicans fought hard to support the FCC’s Restoring Internet Freedom Order. Any legislating on the functions and deployment of Internet technologies must move as a standalone bill through regular order with committee review. These questions are far too important to shoehorn into a massive bill without rigorous debate.   

Any funding for broadband buildout must target locations without any broadband connection first, and this should be determined by the Congressionally mandated FCC broadband maps. Congress has oversight over the FCC and the FCC has already conducted several reverse auctions. Reverse auctions get the most out of each taxpayer dollar towards closing the digital divide. Areas where there is already a commitment from a carrier to build out a network, should not be considered for grants, and the NTIA should not be able to override the FCC’s map to redefine “unserved” and subsidize duplicative builds.  

Government-controlled Internet should not be prioritized in any grant program. With few exceptions, government-owned networks (GONs) have been abject failures. For example, KentuckyWired is a 3,000-mile GON that was sold to taxpayers as a $350 million project that would be complete by spring of 2016. Those projections could not have been more wrong.   More than five years past the supposed completion date, fiber construction for KentuckyWired is still “in progress” in some parts of the state and a report from the state auditor has concluded that taxpayers will end up wasting a whopping $1.5 billion on this redundant “government owned network” over its 30-year life. NTIA should certainly not encourage these failures to be replicated.

We appreciate your work to help close the digital divide and agree that access to reliable internet is a priority, however we should not use this need to serve as a cover for unnecessary

government expansion. Please feel free to reach out to any of the undersigned organizations or individuals should you have questions or comments. 

Regards,

Grover G. Norquist
President
Americans for Tax Reform
 
Jennifer Huddleston*
Director of Technology & Innovation Policy
American Action Forum
 
Phil Kerpen
President
American Commitment
 
Krisztina Pusok, Ph. D.
Director
American Consumer Institute
Center for Citizen Research
 
Brent Wm. Gardner
Chief Government Affairs Officer
Americans for Prosperity
 
Jeffrey Mazzella
President
Center for Individual Freedom
 
Andrew F. Quinlan
President
Center for Freedom and Prosperity
 
Jessica Melugin
Director Center for Technology and Innovation
Competitive Enterprise Institute
 
Matthew Kandrach
President
Consumer Action for a Strong Economy
 
Yaël Ossowski
Deputy Director
Consumer Choice Center
 
Roslyn Layton, PhD
Founder
China Tech Threat
 
Ashley Baker
Director of Public Policy
The Committee for Justice
 
Tom Schatz
President
Council for Citizens Against Government Waste
 
Katie McAuliffe
Executive Director
Digital Liberty
 
Annette Thompson Meeks
CEO
Freedom Foundation of Minnesota
 
Adam Brandon
President
FreedomWorks
 
George Landrith
President
Frontiers of Freedom
 
Garrett Bess
Vice President
Heritage Action for America
 
Carrie Lukas
President
Independent Women's Forum
 
Heather Higgins
CEO
Independent Women's Voice
 
Tom Giovanetti
President
Institute for Policy Innovation
 
Ted Bolema
Executive Director
Institute for the Study of Economic Growth
 
Seton Motley
President
Less Government
 
Zach Graves
Head of Policy
Lincoln Network
 
Matthew Gagnon
Chief Executive Officer
Maine Policy Institute
 
Matthew Nicaud
Tech Policy Specialist
Mississippi Center for Public Policy
 
Brandon Arnold
Executive Vice President
National Taxpayers Union
 
Tom Hebert
Executive Director
Open Competition Center
 
Ellen Weaver
President & CEO
Palmetto Promise Institute
 
Eric Peterson
Director
Pelican Center for Technology and Innovation
 
Lorenzo Montanari
Executive Director
Property Rights Alliance
 
Jeffrey Westling
Resident Fellow, Technology & Innovation Policy
R Street Institute
 
James L. Martin
Founder/Chairman
60 Plus Association
 
Saulius “Saul” Anuzis
President
60 Plus Association
 
David Williams
President
Taxpayers Protection Alliance
 

Dann Mead Smith
President
Washington Policy enter

* individual signer; organization listed for identification purposes only

 

Photo Credit: Denny Müller

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Americans for Tax Reform Asks FCC to Stop Wasting Valuable Spectrum

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Posted by Katie McAuliffe on Thursday, July 8th, 2021, 11:11 AM PERMALINK

Americans for Tax Reform and Digital Liberty submitted comments to the Federal Communications Commission in support of allowing use of the 12.2–12.7 GHz band by satellite providers. Satellite use in this spectrum holds the potential for many applications whereas incumbents have failed to engage in widespread use of it. 

You can read our comments below or as a pdf by clicking HERE

July 07, 2021

VIA ECFS

Marlene H. Dortch
Secretary
Federal Communications Commission
45 L Street, N.E.
Washington, DC 20554
 

Re: Expanding Flexible Use of the 12.2-12.7 GHz Band, WT Docket No. 20-443; Expanding Flexible Use in Mid-Band Spectrum Between 3.7-24 GHz, GN Docket No. 17-183

Dear Acting Chairwoman Rosenworcel,

The undersigned have a fulsome record supporting the Federal Communications Commission’s efforts to expand access to spectrum that will allow 5G services. During the request for comments in RM-11768 the Multichannel Video and Data Distribution Service (MVDDS) petition for rulemaking that included requests for two-way mobile broadband service in the 12.2-12.7 GHz band, we respectfully requested that the Commission deny the MVDDS petition.

Today, we renew our request to deny MVDDS use of the 12.2-12.7 for two-way mobile broadband service, or 5G services. We believe this throws unnecessary uncertainty into a nascent technology and market which is already demonstrating great promise towards injecting competition in the market and closing the digital divide.

We understand and support the Commission’s goals of finding maximum efficient uses for scarcely available spectrum bands, however, the threat alone of interference to newly launched satellite networks could greatly damage the FCC’s priorities of universal connectivity and broadband competition.

The FCC has made leaps and bounds in connecting the unconnected in unprecedented times. One of the ways the Commission has pursued these goals is by approving novel provisions of broadband service. As such, in 2018 the FCC licensed several Low Earth Orbit (LEO) non-geostationary orbit (NGSO) satellite constellations that will utilize the 12Ghz band, which is shared with Direct Broadcast Satellite (DBS), in order to provide high-speed broadband internet to rural and remote users to help close the digital divide.

Just three years following FCC authorization in 2018, the U.S. is leading the world with over 1,500 satellites deployed, billions of dollars in private capital invested and thousands of U.S. jobs created, resulting in initial broadband services available across the United States and other parts of the world. While satellite broadband service has been available for years, this new generation of satellites employs updated technologies that can deliver true high-speed broadband that is on track to reach gigabit speeds. At least one satellite provider will offer speeds of up to a gigabit per second and latencies ranging from 25 milliseconds to 35 milliseconds. These speeds will compete in a very real way with fiber, cable, DSL, satellite, 5G, and other broadband offerings. All types of broadband services compete with each other. Having more providers in the market drives down prices for everyone – in rural and urban areas. Any suggestions to relegate this service only to rural areas, because of new interference proposed by Petitioners, could rob the satellite sector from attracting sufficient customers to justify full deployment.

In stark contrast to the demonstrable deployment and increasingly widespread service provided by next-generation satellite systems, the low-power, fixed terrestrial licensees asking the Commission to change its rules on 12 GHz are nothing more than an encumbrance to true broadband.  Despite 15 years of assurances, these terrestrial licensees have effectively deployed no meaningful service.  Given this history of empty promises, we encourage the Commission to disregard speculative pleas to redefine the rules. The Commission correctly established a very high bar in its Notice of Proposed Rulemaking, placing the burden on the terrestrial licensees to prove that they would not interfere with next-generation satellite broadband and asked for a real proposal on how they would use the band to provide broadband to unserved and underserved communities.  They have not done so.

Moreover, use of this spectrum would not significantly enhance America’s position in the race to 5G. The 12 GHz Band is not optimal for 5G. The need right now is mid-band spectrum in the range of 2 GHz to 6 GHz. The 12 GHz spectrum clearly has utility, but, due to well-known propagation and capacity constraints, telecom companies actively building and deploying networks have not made it a primary target, especially for deployment into rural areas.  There are no 5G technology standards in the pipeline for this band and receiving new ITU allocations for global 5G access could take nearly a decade.  Opening the spectrum for auction under a new allocation would further delay deployment for any of the suggested technologies such as, fixed broadband, mobile and IoT.  These are all technologies that terrestrial licensees are not likely to deploy quickly as they have no background using the band for 5G technology and have not developed methods of broadband connectivity over 15 years under their current authorization.

The 12 GHz band is already heavily shared and extensively utilized. Next-generation satellite systems like Starlink are focused on communities that have few options.  Threatening this spectrum with interference or taking it away from satellite broadband to re-allocate to companies who have repeatedly failed to deploy would not serve consumer interests or help close the digital divide. 

From serving Washington State first responders during wildfires, to connecting tribal lands, and school districts in remote areas of Wisconsin, Texas, Virginia and North Carolina, Starlink is demonstrating real use of the 12Ghz band to close the digital divide. As these pilot programs continue to expand and connect the unconnected now where other technologies for broadband provision have not been an option, the FCC should avoid a rulemaking that would limit the ability of NGSO systems to serve customers across the United States, and especially those who have not previously been able to get internet access.

The Commission should not hamstring the efforts of next-generation satellite providers as they are becoming available to millions of unserved Americans.  Changing the rules now would pull the rug out from U.S. NGSO systems as they are actively serving customers.  It would negatively impact investment and materially degrade the ability for these systems to provide service to consumers especially in remote and rural areas where 5G is a very very distant reality.

Thank you for your consideration and the opportunity to submit these comments.

Respectfully,

Grover G. Norquist
President
Americans for Tax Reform
 
Katie McAuliffe
Executive Director
Digital Liberty
 

Photo Credit: NASA

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