Wireless Tax Moratorium Moves Forward

Wireless customers, on average, reportedly pay 16.3 percent in fees and taxes, representing more than twice the average rate of 7.4 percent on other goods and services.

July 14, 2011

2 Min Read
Wireless Tax Moratorium Moves Forward

By Josh Long

The House Judiciary Committee on Wednesday passed legislation that would impose a five-year moratorium on new local and state wireless taxes or fees that are classified as discriminatory.

The Wireless Tax Fairness Act, which does not impact existing revenues from local or state governments, will go to the full House of Representatives for a vote.

The legislation would impose a freeze on new taxes that are imposed only on wireless services. The moratorium would exclude fees dedicated by state or local jurisdictions to support E-911 communications systems and fees or taxes used to preserve and advance Federal universal service and similar state programs under Section 254 of the Communications Act of 1934. Also, an amendment to the bill would exempt local wireless devices from the moratorium through direct approval of voters.

Wireless customers, on average, pay 16.3 percent in fees and taxes, representing more than twice the average rate of 7.4 percent on other goods and services, according to a press release issued by the office of Rep. Zoe Lofgren (D-Calif.), who introduced the legislation. Such fees often are comparable to taxes on luxury items like alcohol and tobacco.

Over the past few years, state or local governments in Arizona, California, Delaware, Georgia, Hawaii, Kentucky, Maryland, Maine, Nebraska, New York, Oregon and Wisconsin have imposed or attempted to impose new discriminatory taxes on wireless service,” said Scott Mackey, a partner and economist at Montpelier, Vt.-based KSE Partners LLP, in written testimony in March on Capitol Hill. And wireless users have every reason to be concerned about the possibility of new targeted taxes in other states and localities as well.”

Congress should pass the bill because tax burdens on consumers and wireless providers continue to grow and new wireless taxes deter investments in broadband networks, said Mackey, who has worked with wireless providers to eliminate or reduce taxes at the local or state level. The legislation also would protect wireless customers from new taxes that are a burden at a time when many families are struggling, Mackey said.

But a local government official brushed aside such arguments during the same congressional hearing.

This bill is not about expanding broadband technology or providing tax parity for an overtaxed industry,” said Bernita Sims, a council member with the City of High Point, N.C., and member of the Finance, Administration and Intergovernmental Relations Committee of the National League of Cities. Rather, this bill is about special treatment and favoritism for wireless phone companies that continue to experience explosive growth and profits.”

Sims expressed opposition to Congress preempting local and state taxation.

Our citizens do not need to be protected by the long-arm of the federal government,” she stated. They already have the power to change locally imposed taxes.”

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