Net taxes? Over my dead body!

A recent suggestion to tax Internet and other data connections with a levy originally intended to pay for the Spanish-American War has raised alarms far beyond technology companies.

One of the sharpest critics of the idea has been Rep. Christopher Cox, a California Republican who's one of the leading advocates for lower taxes in Congress. Cox also is chairman of the new Homeland Security committee, which oversees both physical and "cyber" security.

First elected in 1988 to represent an area near the University of California at Irvine, Cox was an early supporter of rewriting securities laws to prevent predatory suits against high-tech companies and fought to curb near-automatic growth in federal budgets. He also championed the Internet Non-Discrimination Act, which shielded e-commerce from taxation by local and state governments.

While Cox has been talked about as a possible U.S. senator from California, so far he's declined a direct challenge to Dianne Feinstein or Barbara Boxer. CNET News.com spoke with Cox about Internet taxes, Microsoft and security.

Q: What's going on behind the scenes at the tax committee? What led it to suggest this as an "option?"
Cox: The Joint Committee on Taxation abused its responsibility to include presenting tax increase options to Congress. That responsibility was executed gratuitously here because some inquiring senators weren't soliciting ideas for tax increases. Instead they were asking the Joint Tax Committee on how to include compliance with our existing tax laws.

Have you talked to Sen. Orrin Hatch, who chairs the tax committee?
Cox: I have not. I think the problem lies not with the senators but with staff that is involving itself gratuitously in proposals to raise taxes on the Internet.

Sometimes senators and representatives write to the committee and ask for ideas about how to raise revenue. In those cases, even though individual staff members may not (want tax increases), they propose it. But in this case, the request to the committee did not call for proposals to raise taxes.

Can you think of any justification for extending the Spanish-American War tax to the Internet?
Cox: There isn't a good reason for it. On the Energy and Commerce Committee, which I just left after 10 years, the issue has been studied exhaustively. The Spanish-American War tax, as we know from exhaustive research, ought to have been repealed over half a century ago. The Congress promised when it was enacted that immediately

upon the conclusion of the Spanish-American War and the need to finance it, this so-called "luxury tax" on the super-rich would be repealed.

Do you see the issue of Internet sales taxes coming up again?
Cox: I'm personally going to push for enactment of my legislation to make the ban on Internet taxes permanent. And of course we still have the VoIP issues to deal with.

What do you think Congress will do regarding VoIP this year?
Cox: The philosophical question that Congress must address is whether the Internet is going to be the model for telecommunications in the future. Or, rather, whether 1930s-era regulation is going to be the model for the Internet. I hope the Internet is not going to be dragged into the 1930s.

Some of last year's legislation dealt with universal service taxes. What do you think should happen regarding universal service and VoIP?
Cox: To the extent that in America we need to subsidize the underprivileged, we should do so. But we should do it out of general (tax) revenues. There's no reason to pick on technology, which is responsible for 100 percent of the productivity gains in our economy.

I think the problem lies not with the senators but with staff that is involving itself gratuitously in proposals to raise taxes on the Internet.

Some technology companies have said the federal government's top cybersecurity official needs a promotion. What's your take?
Cox: That's of course something that we have been pushing hard for in the Homeland Security committee over the last two years, elevating the profile of cyber inside the Department of Homeland Security and inside the federal government.

What would you like the Department of Homeland Security to do that they haven't?
Cox: The general challenge facing incoming Secretary Michael Chertoff is setting priorities. The main focus of DHS has to be on prevention of the most serious kinds of terrorist attacks that could indefinitely disrupt our economy or kill millions of people.

Initially, cybersecurity was thought to be merely an offshoot of infrastructure protection. It was the IT component of dams, roads, bridges, industrial process, and so on. Increasingly in the intelligence community, in the Department of Defense and across the government, we are recognizing that there are distinct cyberthreats with serious consequences.

You're saying that they're viewed as more serious than they were a few years ago?
Cox: The cyberfocus has to extend beyond the control of industrial processes and the IT component of other infrastructure protection. From asymmetric warfare launched by other nations to attacks

mounted by small groups of terrorists, the vulnerability and the risk that we face from cyberterrorism merits elevating our attention to those threats to a higher level.

Has Microsoft done enough to take security seriously?
Cox: I will say that because of its ubiquity across the government, Microsoft has made itself very transparent to its government customers when it comes to security. The level of cooperation on the prevention side has been increasingly high. It is true that just a few years ago, there were complaints that Microsoft didn't do enough in this area, but very recently that cooperation has been very solid.

The Department of Homeland Security has drawn criticism on privacy grounds for projects like CAPPS and Secure Flight. How do you see that playing out in the next year or so?
Cox: The point of the entire exercise is to keep America free. As a result, privacy concerns aren't auxiliary. They're central to our war aims in the war against terrorists.

Increasingly in the intelligence community, in the Department of Defense, and across the government, we are recognizing that there are distinct cyberthreats with serious consequences.

One of the reasons I supported the export of commercially available U.S.-designed encryption is that on balance it will keep people around the world more free. Free communication by citizens in dictatorships will help undermine those very dictatorships. In our own country, there is no good reason to sacrifice our accustomed freedoms in the name of fighting the war on terror.

Some portions of the Patriot Act expire at the end of this year. Should Congress extend them?
Cox: I am strongly in favor of amending parts of the Patriot Act. I would begin with the portions that my committee tried to amend in the last Congress. But there's a lot of the Patriot Act that people don't realize is there. We need to take a look at that enormous piece of legislation (in perspective). I think anyone that says they're completely in favor of it or completely opposed to it is missing the point.

I support that portion of the Patriot Act that tore down walls between intelligence and law enforcement. I'd like to see it disaggregated and let the public understand the debate, make it transparent.