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Local Governments Oppose Bill To Ban Higher Cell Phone Taxes
by Cyndy Liedtke Hogan and Lars Etzkorn
NLC weighed in this week on legislation that would establish a five-year moratorium on new or increased taxes on wireless telecommunications infrastructure and services.
NLC opposes the legislation, which would prevent state and local governments from imposing higher tax rates on cell phone service than on other businesses, because it infringes on local taxing authority.
Don Stapley, president of the National Association of Counties (NACo) and member of the Board of Supervisors of Maricopa County, Ariz., testified before a House Judiciary Administrative Law Subcommittee hearing on behalf of NLC, NACo, the Government Finance Officers Association (GFOA) and the U.S. Conference of Mayors (USCM).
“In today's difficult economic times, where state aid to local governments has decreased dramatically, local taxing autonomy is crucial in helping to ensure that the needs of local citizens, our mutual constituents, are met,” Stapley said.
“What this legislation does is preempt state and local taxing authority and represents a federal intrusion into historically-protected state and local tax classifications,” he continued. “Enactment of this bill would lead other industries to seek similar special federal protection from state and local taxes.”
Stapley told the subcommittee that the bill fails to recognize that not all jurisdictions depend on identical revenue sources. As a result, some localities “may necessarily have to tax wireless services at a higher level than others. Enactment of this bill would force those jurisdictions to rely even more heavily on other types of taxes, thereby shifting the tax burden to those in the community less able to tolerate it.”
Joanne Hovis, speaking on behalf of the National Association of Telecommunications Officers and Advisors, as well as NLC, NACo, GFOA and USCM, said tax treatment of wireless services by federal, state and local authorities has not hindered product innovation, service growth or industry profitability.
Relieving the industry of local tax costs “is unlikely to change investment choices and may simply serve to convert into carrier profits those funds that would otherwise have accrued to localities in this critical economic environment,” said Hovis, president of Columbia Telecommunications Corporation.
“State and local taxes of wireless service are not an obstacle to wireless broadband
deployment,” she said. “On the contrary, it is the broader economics of the wireless communications industry that is the reason for this slower (or nonexistent) deployment in rural areas.”
This legislation, to the extent it attempts to impact broadband deployment through one mechanism, is not timely, according to Hovis, and should await the results of a proceeding now underway at the Federal Communications Commission to create a national broadband plan.
During the hearing, Rep. Zoe Lofgren (D-Calif.), sponsor of the legislation in the House, called the measure essential to broadband deployment. State and local taxes on the industry are “regressive,” she said. Acknowledging state and local governments' resistance to federal restriction of their taxing power, Lofgren said the need to spread broadband should be the overriding priority.
But Rep. Melvin Watt (D-N.C.) called the bill's sweep too broad. “I am not an advocate of discriminatory taxes. My question is how do you define discriminatory?”
Last week, Sens. Ron Wyden (D-Ore.) and Olympia Snowe (R-Maine), both Finance Committee members, unveiled the Mobile Wireless Tax Fairness Act of 2009 (S. 1192). Finance members Sens. Robert Menendez (D-N.J.) and John Ensign (R-Nev.) and three others joined them as co-sponsors.
A joint news release said, “[T]he legislation will keep taxes on telecommunication products and services — which are already on par with the ‘vice taxes' of tobacco and alcohol — from spiraling out of control.”
“While the average tax rate for goods and services is 7.07 percent, the typical consumer pays 15.9 percent of their total wireless bill in federal, state and local taxes,” the release said. “The effective rate of taxation on wireless services increased four times faster than the rate on other taxable goods and services between January 2003 and January 2007.”
S. 1192 is the companion to the House legislation (H.R. 1521) introduced by Lofgren in March.
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