WASHINGTON-The Personal Communications Industry Association may use a recent economic study on wireless taxation to urge Congress to pass a Wireless Tax Freedom Act similar to the Internet Tax Freedom Act enacted earlier this year, said Mary McDermott, PCIA chief of staff and senior vice president for government relations.
Congress passed the Internet Tax Freedom Act as part of the omnibus spending bill in October. The bill imposes a three-year moratorium on new taxes on Internet access and services. During that time, a 19-member commission will study how taxes should be applied to the Internet. Policy makers thought the bill was necessary to continue Internet growth. Indeed, President Clinton said last February in lobbying for the bill that unfair taxation could stunt the Internet’s development.
PCIA fears a similar fate could await the wireless industry if it doesn’t receive some relief from what it calls unnecessary taxes.
The wireless industry faces an ever-growing wall of taxes, fees, assessments and regulations, PCIA recently told the Federal Communications Commission.
“A single brick certainly is without significance in building a structure. However, one brick combined with another, and then another and then another, builds walls. The wireless industry is facing its own type of wall: the cumulative costs of explicit taxes, fees and assessments at all levels of government, combined with the implicit (or internal) costs of compliance with an entire panoply of regulatory obligations,” McDermott said in a letter to the FCC earlier this month.
To prove its point, PCIA commissioned an economic report by former FCC chief economist Michael L. Katz and John B. Hayes of The Tilden Group L.L.C., Oakland, Calif. Katz and Hayes evaluated, among other things, a state and local tax and fee survey by Pricewaterhouse
Coopers L.L.P. In a study of 52 wireless markets, PricewaterhouseCoopers concluded these obligations significantly impede the development of competition by raising the cost of wireless services, which ultimately raises consumer prices.
This paper was included with McDermott’s letter to the FCC and is being shared with congressional staffers. “This is the first attempt to capture the problem,” McDermott said.
One tax that seems to be ripe for elimination is the local franchise fee imposed when a wireless carrier wants to compete directly with the incumbent local exchange carrier in a given city. These franchise fees originally were created to pay for street repairs when streets are dug up to lay wire. Wireless carriers don’t lay wire but are still assessed the tax, McDermott said. It becomes a form of double taxation when wireless carriers also must pay fees for siting antennas, she added.
