Governors don't want feds to take part of funds

BALZ

WASHINGTON -- The nation's governors will put up a united front today when they meet with President Clinton at the White House, determined to prevent the federal government from taking a big share of the $195 billion tobacco settlement reached late last year between the states and the tobacco industry.

The governors also plan to raise the still unresolved question of how states and cities can collect sales taxes from mushrooming commerce on the Internet. Governors say the longer the issue remains unresolved, the more difficult it will be to solve. Despite partisan differences over education policy, members of the National Governors' Association are in agreement about tobacco. They claim they are entitled to all the money in the tobacco settlement and are concerned Clinton already has included proceeds from the settlement in his fiscal 2000 budget. "It's not their money," said Republican Utah Gov. Mike Leavitt, the NGA vice chairman. "There is bipartisan agreement on that." That view was echoed by Indiana Gov. Frank L. O'Bannon, chairman of the Democratic Governors' Association. The governors complain that the federal government, which wasn't a part of the lawsuit between the states and the tobacco companies, wants to take up to 57 percent of the funds, claiming the money should offset federal Medicaid expenditures. Governors are supporting legislation introduced by two former governors, Sens. George V. Voinovich, R-Ohio, and Evan Bayh, D-Ind., that would prohibit the federal government from gaining any of the tobacco money. They want to resolve the issue this year. The Internet taxation issue isn't likely to be resolved this year, but governors are worried about its potential to erode the tax bases of state and local governments and the possibility that over time it will adversely affect Main Street businesses. "Time is of the essence," Leavitt said. "If we don't solve this problem, it will be unsolvable." The issue is whether Internet companies should be required to collect sales taxes on goods and services they sell. The computer industry generally opposes taxation on the Internet, arguing it will inhibit growth and innovation. Governors argue electronic commerce should be subject to some kind of sales tax collection. "Governors are in an awkward position," said Independent Maine Gov. Angus King. "They don't want to be perceived as anti-technology. They don't want to tax the Internet."

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