Governor Gary Locke’s Remarks
Cascadia Mayors Council E-Commerce Meeting
December 10, 1999

Thank you all for being here and thank you Mayor Royce Pollard for that kind introduction. I'm thrilled to be here in Vancouver.

I'd also like to thank Mayor Schell and Mayor Asmundson for inviting me to this third Cascadia Mayors Council Meeting, and I'd like to thank Mayors Katz and Pollard for co-hosting this meeting. I'm pleased to be here because the Cascadia Mayors group is on the leading edge of where we need to be as we enter the new millennium-the Cascadia Mayors know that we can no longer exist in isolated pockets of cities, states, or even countries. The Cascadia Mayors know that regionalism is the wave that we'll ride into the shore of prosperity in the global economy of the 21st century.

We'll be in the 21st century in 21 days. And that 21st century will be driven by a global economy. And in this brave new world, the future of our region is up to us. As long as we keep our fingers on the pulse of the global economy, our region will flourish.

And one area of commerce we need to keep our fingers on is the Internet. A whole new vocabulary has sprung up around the Internet. Snail mail, e-tailers. . . But the Internet has caused more than just a social revolution. It's causing an economic revolution as well.

The Internet evolved into a business tool just four years ago- in 1995. Within three years, 171 million people had access to the Internet. And over half of those people reside in the United States and Canada. And it's been projected that Internet spending will grow from $85 billion this year to $150 billion by 2003-some sources even predict growth up to $203 billion by 2003!

These numbers are staggering. Especially since retailers don't have to collect sales tax unless they have a physical presence in the state in which the consumer lives.

Here on the Cascadia Corridor, we like e-commerce. We are home to amazon.com, Microsoft, homegrocer.com, drugstore.com, and many others. We are a high-tech region and we certainly want to encourage the growth of e-commerce. It is a fantastic economic engine. But here in Washington, we have no income tax so we rely heavily on sales tax to keep our state and local governments running smoothly.

Let's just look at a typical scenario. Sarah decides she wants to buy a Jeep, because she rode around in a friend's Jeep one day and thought it was pretty neat. And anyway, her car's on its last leg, and her new tabs will only be $30. So Sarah goes out to Dick Hannah's Jeep Eagle place out on Auto Mall, and Chris McKinney pours her some coffee, educates her on all of her options and then Chris and Sarah hit the road. She test drives a red Wrangler, a green Jamboree and a midnight blue Cherokee with tinted windows.

After spending a few hours with Chris, Sarah thanks him and walks out. On her way home, Sarah meets her husband, Tony, downtown to do some Christmas shopping. They stop at Boyd's 88 Center and ask the clerk about the best gifts for an infant, a one-year-old, and a five-year-old. The clerk shows them a Woozit for Sarah's nephew Jackson, a Tom-Tom drum for her niece Katie, and a huge stuffed panda bear for her sister's new baby. They thank the clerk and leave the store.

They walk down the street to Huckleberry's Books & Coffee. They flip through the books, deciding who would like what in their families, and they make a list. They do the same kind of shopping at Runyan's Jewelry, The Country Peddler and other downtown stores. They do the kind of shopping where instead of walking into stores with a list, they walk out of the stores with a list.

When they get home, they aren't loaded down with bags and receipts. Just ideas. Tony throws his keys on the counter and boots up the computer. Sarah goes into the kitchen to make some tea. And by the time the tea's ready, Tony has completed their Christmas shopping on the web and found a car that has all of the bells and whistles Sarah decided she wanted.

What's wrong with this picture? Sarah and Tony are happy-Sarah got to test drive the car she wanted. They got to touch the stuffed Panda to make sure it was soft enough for Baby Jackson. Shoot, they even saved themselves a pretty penny on their Internet purchases because the companies online don't have the overhead of showrooms. And there's no sales tax on the items, except on the car when it's registered.

But Chris McKinney is going home, yet again, having spent his day taking consumers on test drives without making a single sale. And the pages of the books at Huckleberry's are thumbed and smudged, but back on the shelves.

The complications inherent in this scenario are two-fold. First, our brick and mortar businesses-the heart of our downtowns-are being used as showrooms for email shoppers. Second, our cities and counties and states are losing revenues in lost sales tax.

To further complicate things, many citizens think Internet transactions should be exempt from any taxation. Who wants a new tax? I don't. But let's face it-we won't need mayors if we don't have downtowns.

We all know how business works. It is driven by competition. No business can ignore this new economic engine of the Internet if they expect to survive in the 21st century. For instance, Albertsons, the second biggest grocery distributor in the United States, is going online. Why? Because that's where homegrocer.com is-that's where the competition is.

So our brick and mortar businesses are moving to click and mortar businesses. You can walk into Barnes & Noble and browse through hundreds of books. They even have a coffee shop there and comfortable chairs for you to lounge in. And then you can go home and click to Barnes & Noble.com, and order your books. And they won't charge you sales tax on the purchase because Barnes & Noble is one store, and Barnes & Noble.com is another store-one without a physical nexus.

The impact on our Main Streets, folks, will be dramatic. But as I said, businesses learn how to adapt to a changing economy-they are moving into click-and-mortar and will survive. But our tax system must not put our Main Street in-store retailers at a competitive disadvantage.

That's why I accepted a position on the Advisory Commission on Electronic Commerce. Because it is imperative to our economic future that we find a way to:

1. Ensure fair trade that will ensure the continuing prosperity of our brick and mortar businesses and our e-tailers,
2. Keep our tax system fair and nondiscriminatory,
3. and maintain our sovereignty as states and local governments in terms of taxation.

Our retailers are being innovative in blending Internet technologies with traditional retail practices. We need to be equally innovative in modernizing our tax system to keep step with our ever-evolving economy.

One thing we could consider is streamlining the tax system. That is, there are currently over 8,000 different taxing jurisdictions in the United States-over 300 jurisdictions in the state of Washington alone. We aren't exactly making it easy for e-tailers to collect sales tax. Maybe we should look at restructuring our sales tax rates to make it easier for retailers to collect this tax.

There are many options to consider, and I encourage all of you to approach these discussions with an open mind and the spirit of innovation. And with a deep understanding of how crucial it is that we find a solution.

Here in Washington we spend 60 percent of our general fund budget on education. And we cannot allow that funding to evaporate.

Internet businesses depend on the availability of well-educated youths to fill the jobs of the next century. Wouldn't it be ironic if-because we did not fix the current problems with the tax system-we could not fund the educational programs that provide them with these skilled workers?

Education is my number one priority. Our teachers need to be able to train our children to be the next round of innovators. It is the job of our generation to ensure that the Cascadia Region remains on the cutting edge. And a strong education system is the foundation of a strong society and a healthy economy.

Let's work together. Let's send a message to the rest of the world. Let's bond together in regional leadership here along the Cascadia Corridor. Let's courageously embrace the complications that face us, and work together to find a solution that will benefit us all.

Finally, I'd just like to say thanks to all of you here today. The cooperation you have exhibited-the way the Cascadia Mayors Council sets bipartisan differences aside in order to form a vision of future prosperity for all of us is outstanding.

Thank you very much.
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