10 to Watch: Jim Gilmore & Michael Leavitt

Both embrace the Internet. Both are tax-cutting governors. And both are considered rising GOP stars. But when it comes to Internet sales taxes, Virginia Gov. Jim Gilmore and Utah Gov. Michael Leavitt are as different as, well, as donkeys and elephants.

Leavitt, chairman of the National Governors' Association and a member of the Advisory Commission on Electronic Commerce created by Congress in 1998, sides with the many state and local officials who worry that tax revenues will evaporate as the economy moves online. Also in the for-tax corner: traditional retailers, led by Wal-Mart, which say they can't compete with online rivals that often don't have to charge sales tax.

Gilmore, who chairs the 19-member ACEC, favors a permanent tax exemption for Net sales. Backed by Republicans in Congress, antitax activists and some local officials, Gilmore argues that the congressional moratorium on new Internet taxes has been key in spurring e-commerce. He says forcing Internet merchants to collect taxes for the nearly 7,500 jurisdictions that charge sales tax would cripple the online marketplace.

The ACEC is mandated to report back to Congress by April. There are three options it can recommend: Ban Internet sales taxes, allow states to override a loophole exempting mail-order companies from collecting sales taxes in states in which they have no physical presence, or keep the status quo. Expect plenty of fireworks around the issue until then.

"It's a difference of opinion, philosophy, point of view and approach," Gilmore says. "My focus is on the people using the Internet, not on the states or the companies. I'm talking about poor people who need an opportunity to enhance their purchasing power, remote people who can't get to malls and small-business people who for the first time can broaden their market in a way that all the big, capital-intensive people always could."

Leavitt admits that his arguments favoring sales tax reform and using third-party collectors (such as credit card companies) scare some Republicans.

"The politics of this are very complicated and not very pleasant," he says.

"The pressure to make this happen will have to come from the retail community.

But if a sales tax turns out not to be adaptable to the information economy, then local and state governments will face some tough decisions. They'll either have to raise income taxes or cut services."

The governors' difference of opinion on the tax question is startling, given their similarities.

Leavitt, 48, is the son of a former gubernatorial candidate and state senator.

He was elected in 1992 and has led Utah during a period of tech-fueled economic growth. His latest state budget proposes to cut unemployment taxes, and in the past he has reduced property, income and other taxes.

Gilmore, 50, rode to the statehouse in 1997 on a single issue: killing the state's tax on personal cars and trucks. The son of a supermarket meat cutter, he's a booster of northern Virginia's growing tech community, which includes the headquarters of America Online and MCI WorldCom.

The back-and-forth between the two at the ACEC meetings is rancorous at times.

Leavitt once embarrassed Gilmore by trying to rally opposition to the latter governor's choice for ACEC executive director, who, Leavitt pointed out, was married to a lobbyist for the American Electronics Association. In turn, Gilmore has been dismissive, injecting an impatient "whatever" once as Leavitt tried to make a point.

The ACEC needs only a simple majority to make a recommendation to Congress, but don't look for the arguments to end there. As soon as Congress gets the hot potato, the whole contentious lobbying game likely will start all over again.

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