Elesha Barnette
+ FollowTelecoms: 1 Broke Cities: 0
Before you get all huffy and start complaining about corporate greed read a bit further. This is a win for us; and by us I mean anyone who owns a cell phone.
This week the U.S. House voted to place a five year moratorium on new state and local taxes on wireless services, providers, or property such as cell phones. The bill entitled, the Wireless Tax Fairness Act, is sponsored by Representative Zoe Lofgren, a California Democrat.
The House vote is “a crucial step toward providing wireless subscribers with some much-needed relief,” Steve Largent, president of CTIA-The Wireless Association, said in an e-mailed statement, according to the Bloomberg Businessweek.
The vote is also a win for consumers because wireless users currently face a combined federal, state, and local tax and fee burden of 16.3 percent, a rate two times higher than the average retail sales tax rate and the highest wireless rate since 2005. Of course that is an average. If you live in Florida, Washington or New York, your wireless taxes are north of 20%, with Nebraska’s wireless tax rate a whopping 23.7%. Wireless tax rates are almost double the average rate of 7.4% on other goods and services, even though wireless is no longer a luxury – it is a necessity if one is to find a good job, state of the art health care, and a quality education in the digital age.
Wireless taxes are inherently regressive, falling disproportionately on low and middle income consumers.
Yesterday, the Minority Media and Telecommunications Council endorsed the bill, pointing out that “African Americans and Latinos are leading the nation in wireless and smartphone usage, and they disproportionately comprise the nation’s low-income population. When states and municipalities raise the tax burden on the most vulnerable Americans, the ability of these citizens to break the trajectory of poverty by connecting to vital services and opportunities is more difficult, and the incentive to use broadband for these purposes is discouraged.”
And earlier this week, the Joint Center for Political & Economic Studies produced a comprehensive report on wireless taxation finding that wireless services taxes are a barrier to wireless broadband adoption for low-income, low-wealth consumers with few other inexpensive broadband choices.
The Senate has similar pending legislation and while it has 12 sponsors, no hearings have been set yet because two other wireless tax embargo proposals have died. Supporters of the legislation are hopeful that the win in the House will be a signal to the Senate to get the ball rolling.
While this is clearly a win for telecoms and most importantly the consumers, city and state elected officials feel the bill puts another roadblock in the paths of local governments trying to pull cities from the brink of default or back out of the red.
Unfortunately for local governments, telecoms have the people to back them on this legislation. Excluding Warren Buffet, raise your hand if you want more taxes?
*Insert crickets chirping here*
No one wants more taxes in this economy. So while local governments certainly need tax revenues, in the long run universal broadband access and adoption will generate far more local tax revenues than those generated by extraordinarily high sales taxes on an essential communications service. This is essentially a win for everyone involved.
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