WASHINGTON-The wireless industry, increasingly beset with new local, state and federal taxes, is
hoping to capitalize on the GOP-led Congress’ plans to parlay unexpectedly massive federal surpluses into a big tax cut
this year.
Senate Majority Leader Trent Lott (R-Miss.) and House Speaker Dennis Hastert (R-Ill.) have made tax
cuts top priorities in the 106th Congress.
But the Republican tax-cut initiative runs counter to President Clinton’s
demand that federal surpluses be reserved for baby boomer Social Security and other social entitlement
programs.
The debate over how to spend the projected $4.4 trillion in surpluses during the next 15 years-a problem
unthinkable just a few short years ago when whopping budget deficits reigned-likely will be the defining issue of a new
Congress already hostage to a Senate impeachment trial of uncertain length and to the whims of 2000 presidential
politics.
For sure, Republicans-punished in last November’s election for paying too much attention to scandal and
not enough to meat-and-potato issues-are anxious to win voters back with a tax cut.
Regardless of its outcome, the
debate gives the wireless industry a unique window of opportunity to seek relief from the 3 percent federal excise tax
on telephone service; from universal-service obligations that force carriers to subsidize Internet computer links to
schools, libraries and rural health-care facilities but effectively blocks them from drawing on the fund; and from a
panoply of other levies and surcharges that are increasing subscribers’ monthly bills.
In addition to explicit taxes,
wireless carriers are taking financial hits from the imposition of franchise fees, antenna-siting fees and federal mandates
associated with local number portability, digital wiretap implementation, customer proprietary network information
rules, enhanced 911 rollout and other regulatory requirements imposed by the Federal Communications
Commission.
“It’s death by a thousand cuts,” said Bob Roche, who compiles statistics for the Cellular
Telecommunications Industry Association.
Roche said in low-tax states, the average user is paying 15 percent in
taxes. In high-tax states, like New York, Roche said wireless subscribers spend 20 percent in taxes, or about $155 a
year.
Whether GOP tax cutters’ coattails are long enough to carry wireless carriers is unclear. At least the wireless
industry will not be fighting the battle entirely alone.
Help will come from the United States Telephone Association,
whose Baby Bell and GTE Corp. members also want to kill the 3 percent federal tax on telephone service and other
levies, like the Alabama franchise tax South Central Bell is challenging before the U.S. Supreme Court.
A
promising development for industry came last week as Senate Commerce Committee Chairman John McCain (R-
Ariz.)-who’s exploring a presidential bid-reintroduced a bill to repeal the 3 percent federal telephone tax.
“The
telephone is a modern-day necessity, not a luxury as it was in 1898,” said McCain.
The telephone tax was
imposed 100 years ago to help fund the Spanish-American War. It reappeared to help raise revenue for World War I
and remains in effect to this day.
“With all the new bills consumers have to pay thanks to the 1996 telecom
act, they don’t need to keep paying for wars our grandfathers fought,” McCain said. “Taxation without
representation is tyranny, but taxation without necessity is lunacy.”
The Internal Revenue Service is
considering extending the 3 percent tax to prepaid telecom calling cards and services.
Mary McDermott, senior vice
president and chief of staff for government relations at the Personal Communications Industry Association, said the
web of taxes are a nightmare for carriers.
“One of the problems our members have talked about is the
administrative burden associated with regulatory fees and taxes. Since calls are mobile, a customer who is billed in
Maryland may be in Virginia, calling someone in the District of Columbia. It becomes very burdensome to determine
what fees and taxes should be paid. Uniform sourcing would allow that, for a particular customer, the taxes would be
based on the billing address rather than call-by-call,” she said.
McDermott said industry tax complaints have
been brought to the attention of lawmakers and regulators, and PCIA is hopeful the FCC will flag the issue in an
upcoming report to Congress on advanced telecommunications services.
Helping PCIA make it case against
wireless taxes is a study by former FCC chief economist Michael Katz and John Hayes. Based on a survey of 52
markets, the study found taxes and regulatory burdens significantly decreased carriers revenues and increased their
costs.
Washington reporter Heather Forsgren Weaver contributed to this report.
