Cellphone Tax Moratorium Gets Key Sign-Off in House
The House Judiciary Subcommittee on Commercial and Administrative Law approved Wednesday the Cell Tax Fairness Act, HR-1521, by voice vote, with only one objection, from a member concerned about the effect on local and state government. The measure would place a five-year moratorium on new state and local taxes and fees imposed only on wireless services.
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The full committee needs to mark up the bill to send it to the House floor. A companion bill, the Mobile Wireless Tax Fairness Act, S-1192, by Sen. Ron Wyden, D-Ore., awaits markup in the Finance Committee.
Freshman Rep. Judy Chu, D-Calif., offered the only dissent. “This bill preempts state and local governments’ power to determine tax rates and pulls the rug out from under them at a time when they face massive budget shortfalls,” said Chu, a former mayor of Monterey Park, Calif. “Whenever possible, federalism principles dictate that we must allow state and local governments the autonomy to set their own tax laws in response to their city’s needs."
"I support this legislation because I understand the need for fair tax policies to encourage capital investment and the creation of jobs, jobs, jobs, jobs,” said Rep. Steve Cohen, D-Tenn., the subcommittee chairman. “More importantly, wireless subscribers should not bear the brunt of higher taxes, especially when those taxes are regressive in nature.” Cohen said he understands state and local governments that need new revenue sources. “But the legislation we are considering is not intended to affect current state and local government revenues,” he said. “HR-1521 will not prevent taxing authorities from taxing wireless services and providers. It merely imposes a short moratorium on certain new discriminatory taxes.”
Rep. Zoe Lofgren, D-Calif., the bill’s main sponsor, called the measure consistent with the National Broadband Plan’s goal of increasing broadband adoption nationwide. “Discriminatory taxes on wireless service are not consistent with this top national priority,” she said, saying the House has held hearings on the legislation during two Congresses. “The empirical record, I think, is clear -- cellphone bills are on average taxed at far higher rates than other goods and services,” Lofgren said. “These taxes fall particularly hard on working class and lower income Americans, who are the most likely to rely on their cellphone for all of their communications, including access to the Internet.”
Rep. Trent Franks, R-Ariz., the subcommittee’s ranking member, said the bill has 194 sponsors, making it among the most “popular” items this Congress. “Nationwide the average tax rate on wireless services is 15.19 percent, which is more than double the average sales tax for all businesses,” Franks said.
CTIA and Verizon called for Congress to complete action on the legislation. “As more Americans rely on their wireless devices as their only phone and on-ramp to the Internet, taxing their services at more than twice the rate applied to other goods and services is discriminatory,” said CTIA President Steve Largent. “These types of taxes are regressive and make little sense in today’s mobile information-driven economy."
"By providing a ’timeout’ on new discriminatory and unfair taxes this year, Congress can protect wireless customers from new burdens that make broadband connections less affordable and stifle high-tech innovation and growth,” said Verizon Senior Vice President Peter Davidson. “With the limited number of days remaining in this Congress, we encourage the leadership to continue this momentum and move this measure to the House floor very soon.”