WASHINGTON-Seeking to end a century-old “luxury” tax on telephony, Sen. John McCain (R-Ariz.) along with House colleagues Jennifer Dunn (R-Wash.) and Billy Tauzin (R-La.) introduced bills aimed at repealing the 3-percent federal excise “tax on talking.” With this action, McCain made good on a promise made at February’s Wireless ’98 to look into the issue, which also affects wireless users.
“Eliminating the federal tax on talking is just one step in reducing the bite of state and federal taxes, mandates and fees that wireless and wireline phone customers pay,” commented Cellular Telecommunications Industry Association President Tom Wheeler. “Every month, consumers pay up to 20 percent to 30 percent more on their wireless phone bills than the actual cost of service, the result of excessive local fees and costs of other mandates. If public officials are serious about fostering competitiveness in telecommunications and encouraging innovation, then they must stop thinking of phone bills as a vehicle for general tax collection.”
According to McCain, the tax-first instituted in 1898 to finance the Spanish-American War and used as a revenue-raiser for wars and deficits since then-was levied on a service that at the time was considered a luxury and not a necessity. “The Congress specifically recognized the need for all Americans to have affordable telephone service when it enacted the 1996 Telecommunications Act,” he said on the floor. “The telephone excise tax, which bears no relationship to any government service received by the consumer, is flatly inconsistent with the goal of universal telephone service.” That fact, coupled with a projected $8 billion federal budget surplus, should mean the end of this charge.
McCain also mentioned that the tax impacts low-income and rural Americans more than it does the middle class, and that other rate increases attributable to universal-service costs will add to the bills of those who can least afford it.
“The fact that the telecom act is imposing new charges on consumers’ bills makes it absolutely incumbent upon us to strip away any unnecessary old charges, and that means the telephone excise tax,” McCain said.
Wheeler told RCR that the tax-and-mandate issues go far beyond that of the excise tax, although that item is a “hallmark” of what is wrong.
“The government tax-and-mandate policy conflicts and plays catch-up ball with its telecom policy,” he said. With competition forcing prices down and stimulating new services, implementation of new local, state and federal fees counteracts this trend by taking away from subscribers the savings they gained from choice. For example, Illinois lawmakers want to impose a rights-of-way fee on wireless operators, Wheeler said, “and we don’t even use rights of way.”
He added, “Wireless has gotten competitive faster than anyone else, and it is feeling the pinch of taxes and mandates faster than anyone else. What Sen. McCain, Congresswoman Dunn and Chairman Tauzin have done is to go after this, and we are 100-percent behind them.”
