The wireless industry, backed by powerful members of Congress, fired the opening salvo last week in what will evolve this year as an all-out assault against wireless taxes.
At the association’s annual convention in Atlanta, Cellular Telecommunications Industry Association President Tom Wheeler lashed out at the 3-percent excise tax on wireless and wireline telephone service.
The U.S. Treasury brings in $4.5 billion from the telephone service levy.
“The government enacted the temporary excise tax in 1898 to fund the Spanish-American War and re-imposed it in 1914 as a temporary tax on luxury services. Telephone service-basic communications in this country-is not a luxury and it’s time to repeal the tax,” said Wheeler.
Senate Commerce Committee Chairman John McCain (R-Ariz.) told CTIA conference attendees he plans to kill the telephone service excise tax this year.
“The main job of government is to get out of the way. Don’t regulate and don’t tax,” said McCain. “We have some serious challenges to repeal taxes at the government and local levels.”
Rep. Billy Tauzin (R-La.), chairman of the House telecommunications subcommittee, is considering offering companion legislation. Ken Johnson, Tauzin’s spokesman, said the Louisiana lawmaker is studying the issue.
Later this year, cellular carriers will send out bill stuffers to 57 million mobile phone subscribers urging them to write Congress in support of ending the 3-percent excise tax.
But that is just the beginning.
CTIA is in the process of forming a broader coalition to protest state and local taxes that are increasingly being imposed on wireless carriers in connection with antenna siting and other aspects of wireless business.
Wheeler said 20 percent to 30 percent of every phone bill is comprised “of taxes, hidden taxes and government-imposed mandates,” such as universal service payments required under the 1996 telecom act, E911 location capability, number portability and higher-than-cost interconnection rates.
“Carriers from across the wireless industry have told us direct taxes and indirect government assessments handicap them as they try to build out their networks and provide new services and meaningful competition to the American public,” said Jay Kitchen, president of the Personal Communications Industry Association.
PCIA has contracted with Michael Katz, a professor at the University of California, Berkeley, and former chief economist at FCC, who will study the impact of wireless taxation on competition. The findings are due out in April.
“Early estimates suggest consumer price are inflated by nearly 50 percent because governments around the country see our industry as a cash cow,” said Kitchen.
Under the ’96 telecom law, commercial wireless carriers are required to pay into federal and state universal service funds with little chance of drawing on the multibillion-dollar pool to subsidize basic telecom service for low-income and rural citizens.
Even more money is needed today to support a congressional mandate to provide Internet connections to schools, libraries and rural health-care facilities.
The Clinton administration and some in Congress want to shield Internet electronic commerce from taxes. The rationale is that taxing electronic commerce at this time would have a chilling effect on the growth of the nascent Internet.
The mobile phone industry, itself only 15 years old, is making the same argument but not getting any help from the White House and congressional policy makers.
That puts the GOP-led Congress, Clinton and Vice President Gore, a technocrat and a leading presidential candidate in 2000, in direct opposition with the nation’s mayors and governors. They see their power to tax and their revenue bases eroding as a result of Internet electronic commerce.
Early last week, the National Governors Association adopted a resolution to tax electronic commerce.
But on Thursday, President Clinton reiterated his support for a moratorium on Internet electronic commerce taxation in a speech at high-tech conference in San Francisco. At the same time, Clinton was expected to call for the creation of a commission to develop standards for Internet taxation in the future.
RCR reporter Debra Wayne contributed to this report from Atlanta.
