Exclusive Interview With Rep. William Jefferson (D-La.)

While few Blacks may be familiar with him, Rep. William Jefferson (D-LA) is one of the most important political leaders in the world. Serving as a member of the U.S. House of Representatives for 9 years and as a member of its tax-writing Ways and Means Committee, Jefferson has more to do with crafting U.S. fiscal policy than virtually all of the members of the U.S. Congress. And he is one of a handful of Black political leaders actively shaping the economic relationship between the U.S. and Africa, most recently through his advocacy of the African Trade Bill that has just been signed into law by President Clinton. He brings a unique perspective and philosophy to economic and technology issues that face Blacks in America and his influence in Congress continues to grow from year-to-year. I recently spoke with him about a variety of issues and today we print the first part of the excerpts of this exclusive Q&A only at BlackElectorate.com.

Part 1

CM: What are your top legislative priorities at this time, what is most important to you at this particular moment?

Rep. Jefferson: There are a series of things that we are working on to try and bridge the wealth gap between minority or disadvantaged urban communities and the part of the country that is doing extremely well. There are a lot of issues that touch on that question from the issue of the so-called digital divide and being able to help small businesses make the leap to e-commerce to making sure, that as we move into the realm of partnering with Africa, we make sure that we take African and Hispanic-owned businesses there and that we do the same in Latin America and do the same in the areas where we make breakthroughs in trade. With respect to the New Markets Initiative - that we bring back communities as best we can and make them livable for people and places of hope for children but also a place where people can own the things that produce wealth. The President talks a lot about closing the income gap and there has been some progress made in that, in terms of African-Americans and white people in this country, but on the wealth side there has been little movement made. The White community is still twelve times more wealthy than the Black community and the progress that has been made, on the income side, while it is going to help one of these days on the wealth side, unless you emphasize that, it will just start to become people going to get jobs without ever going into business and we will not close the wealth gap very rapidly. So that involves home ownership opportunities, which is usually the first way to get wealth in this country and then onto business opportunities...generally speaking the things that I work on are with that sort of thing in mind, almost always.

CM: Your approach does seem to be pretty consistent. One of the things that makes you unique among all politicians is that it appears that you craft strategies and pieces of legislation that have both the low-end producers and small business owners - people that own property - in mind, as well as those who don't own property. So you are not opposed to advocating a cut in the capital gains tax if it helps promote savings and investment and those with property and capital while at the same time you are advocating, with equal if not more vigor, that people get into the stock market for the first time. And I have seen the same consistency in your position on the Internet. Your work to end the Digital Divide through legislation is designed to enable people to own computers and use the Internet for the first time and then your vote on the Internet taxation issue is designed to maybe help small business owners generate revenue through e-commerce.

Specifically on the Internet taxation issue, the end of the moratorium is coming up and specifically the nexus issue, where it will have to be decided whether states will allow Internet business owners to sell goods and services online without having sales taxes applied to the purchase price. In your mind, right now, do you have a position regarding whether you will vote to extend the moratorium or make it permanent?

Rep. Jefferson: I'm more concerned about access and regulation than I am about the sales tax and I will tell you why. The sales tax is owed by the person who makes the purchase of a product it really is not owed by the business although we always think of it in those terms just because we use the businesses as collection centers for the sales tax because it is convenient but really it (the sales tax) is owed by the person who buys the good. So everybody who buys over the Internet technically owes sales tax to the jurisdiction - if you can figure out which one it is - that you purchased the good in. The debate seems to center around the fact that when a person believes that they can escape the sales tax by purchasing something over the Internet then it places the brick and mortar companies at a disadvantage to those Internet companies that will get the business. That it is how the argument goes...and that this process limits the capacity of jurisdictions to collect the sales tax and pay for fire departments, police and other services. And that is all true to the extent that individuals don't carry out their responsibility to pay the sales tax and remitting it themselves. But I treat it as not much of a big issue. The big issue to me is the access and regulation issue. Now that is the issue that will keep people who are not now doing business on the Internet from doing business on the Internet. I want to make sure that people continue to have easy access to the use of the Internet and that we don't have regulations that burden down new entrants to the Internet as a commercial activity.

CM: So you are not concerned down the road of the emergence of a massive government effort to tax the Internet that may limit the productivity of Internet businesses?

Rep. Jefferson: I am concerned about the regulation and access taxes that could be paid just to use the Internet. The sales tax is owed already, it is now just a problem of how you collect it, where is the point-of-sale and all that sort of business and there you have constitutional issues obtaining as you did in the old mail catalog cases. And the question in the catalog cases was "Where did the sale take place?", " Where was the delivery of the sale made?" and "Could both states (where the buyer and seller are based) claim that the sale generated enough activity in their jurisdiction to justify taxation?" So you have those issues which were resolved and now you are going to have due process and Commerce clause questions around these issues too (in regards to Internet commerce); "Where are these transactions really hitting home?"; "Whose providing a forum for the business activity to take place?"; "Whose providing protection and a legal regime for it?"; all of these things go to the question of whether the due process clause is violated. Now of course, as you know, most of the debate is around how far the Commerce Clause (In The U.S. Constitution) goes and where Congress has the power to interpret that.

CM: The Supreme Court's Quill Decision...

Rep. Jefferson: Yes...If the Supreme Court had said it is a due process decision Congress would be out of it. But the Commerce Clause gets us involved in discussions of how to tailor it. But that is a sales tax issue. I am concerned about regulation and access and to make sure the Internet remains open to future entrants more than anything else right now on the whole question of the Internet regulation.

CM: One factor in all of this that I think is pertinent to the Black Community and Black Political Leadership in particular is that the Big-City Mayors are saying that Internet commerce (and the lack of the collection of the sales tax) is costing them tax revenue but at this point, from most indications, everybody is in agreement that it may cost them tax revenue in the future, but it isn't now...

Rep. Jefferson: That is exactly right...

CM: So, at a certain point, don't you think that the argument needs to be made inside of the political establishment of Black America that instead of looking at e-commerce as a threat to tax revenue, that maybe it should be looked at as engine of economic growth that can actually produce greater tax revenue? And maybe the way that they (Big-City Mayors) are arguing against it (e-commerce) is counterproductive?

Rep. Jefferson: Right...I think that an argument that brings too much regulation right now, will make it harder to gain access, particularly people who live in the cities where the Mayors are governing and I think they (Mayors) ought to look at it with a longer view. People are able to get into an Internet business right now with a whole lot less capital than would be required to get into a business that requires a physical structure and presence. There are people who have web pages up, people are selling on e-bay and auction sites, now, from their homes, just using their computers and in the old days they would have to go find some location, pay somebody rent, get some furniture and get the telephone lines hooked up and hire somebody to work for them and then you never got outside of your community selling now...with the Internet, you can sell all over the place and I think the future portends a lot of revenues for local governments. But there are a lot of things to figure out, there are no easy answers and I think what local governments are going to find is that they are not going to be able to apply their regular tax regimes to these transactions. There is going to have to be some regional or state or national way developed and you will finally be able to collect these taxes because it is going to be harder to pinpoint them down to one parish or one county. And there needs to be time to figure out how to do it in the least oppressive way. And that doesn't burden new people coming on. As more and more folks come on and are Internet-enabled we don't want them shut out.

And on this wealth creation initiative there are two other things that we are working on: In our negotiations recently with the Speaker of the House and the President on New Markets and Enterprise Zones and things relating to that, we talked about...on the wealth creation issue, a project on the so-called 229 of the Housing Act, to enliven that section by taking FHA money - $5 billion in so-called MMI, mortgage insurance money that the FHA has collected in insurance premiums over and above what they expected to bring in - $5 billion dollars worth! And the President is trying to figure out what to do with it. We want to target it to help more people own homes and particularly in communities where it is more risky to give people loans from traditional standards and traditional measurements. So we have a pilot program that we are setting up to take 20% of FHA loans that are put out there now which will end up being over five years - a million homes. And that is part of our package and we are waiting for the Senate to pass it now but the President agreed on it, Speaker Hastert agreed to it and we are going to move that.

The second thing is capital formation for minority businesses. We tried to do that through the SSBICs and through the APICs and the idea is to provide equity capital, "patient capital", so that if a minority business man or woman has a good idea, they now have access to maybe a little money that they may have around the house but not much. They can now go to the bank if they can get a bank loan but they don't have equity capital available to them. Even SSBICs which are designed by federal statute, to provide money, can only give money now in a debt vein because they don't have enough. You have 85 SSBICs in the country and between them they have $400 million in capital - $200 million in private money that they put up and $200 million in money that they brought down from the SBA, the federal government. And so that's 85 of them in total that have to divide $400 million across the country and so many of them are very small. Some only have $3 million, $2million or $1 million...so they can't do very much. They (SSBIC) put out there money to you and then the SBA asks them for there money back so the SSBIC has to call you and they say" Pay me so that I can pay the SBA". So it is always a debt thing now (to improve that) we want to get enough money into the hands of these businesses through the tax incentives that we are providing so that we can bring in "patient money". So if you have a wonderful idea instead of having to rush to pay back people, they can stay with you in a patient fashion for 3-5 years as equity investors so you don't have to pay it back. You can develop your ideas and see your ideas flourish without the pressure of paying back a loan that you can't afford to pay back in the early stages of a business. So we know there is a need for patient capital which we are working on through a set of tax provisions that we have as it relates to SSBICs. And then we had to fight for a tax credit instead of a tax deduction, in the APICs to make sure that we would draw in deep investments there and we had to fight for the 100% elimination of the capital gains which a lot folks on our side (Democrats) didn't want to do. But the Speaker wanted it and the President's people were concerned about it but we got it done, where it is now in the bill.

Part II: Capital Gains, Africa, Estate Tax and The Death Penalty

Wednesday, June 28, 2000

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