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The Truth About the Wireless Tax Fairness Act

Leading our efforts to get the Wireless Tax Fairness Act passed into law is Bob Bolster. Here’s the latest from Bob on who is supporting the bill as well as who will benefit from the bill (hint, it’s all wireless customers).

On November 1st the House of Representatives passed by voice vote, H.R. 1002, the Wireless Tax Fairness Act (WTFA).

Despite some opposition from Washington D.C. based state and local government organizations, H.R. 1002 and its Senate companion bill S. 543, have enjoyed the support of several state and locally elected officials, not only in this Congress, but also in previous Congresses.

  • Minnesota Speaker of the House Kurt Zellers had his testimony included in the record in support of H.R. 1002.
  • Illinois State Senate Assistant Majority Leader James Clayborne testified in support of the legislation.
  • Indiana State Rep. Mara Candelaria-Reardon testified in support of the legislation.
  • Florida State Rep. Joe Gibbons testified in support of the legislation.
  • Michigan State Senator Bert Johnson sent an endorsement letter in support of the legislation.
  • Eatonville, Florida Mayor Bruce Mount sent an endorsement letter in support of the legislation.

Moreover, organizations including the National Hispanic Conference of State Legislators (NHCSL), the National Black Caucus of State Legislators (NBCSL), the National Organization of Black Elected Women (NOBEL) and the American Legislative Exchange Council (ALEC) have strongly support the legislation.

Even the California League of Cities sent a letter to House lead sponsor Rep. Zoe Lofgren expressing its neutrality on H.R. 1002 as a result of the inclusion of a “voter approved” amendment which allows for the imposition of a new, or an increase of an existing wireless tax as a result of voter approved referendum.

Why do all these locally elected officials and organizations support the Wireless Tax Fairness Act? Because currently, the national average tax rate that consumers pay for their wireless services is 16.3% -- more than double the rate paid for general goods and services.

WTFA does not prohibit the taxation of wireless services as erroneously claimed by the Conference of Mayors, but rather it provides for a temporary five-year freeze on any new or discriminatory taxes directly targeted at wireless consumers.

The Congressional Budget Office (CBO) scored WTFA and determined that it has no impact on federal revenues, nor does it impact state, local or tribal revenues. CBO is an independent government organization charged with determining the revenue impact of bills introduced in Congress.

Sadly, the Conference of Mayors shares the same philosophy espoused by Baltimore City Councilman James D. Kraft who in 2010 supported raising Baltimore’s telecommunications tax from 25.2% to 27.7%. Kraft stated, “Some residents don’t pay income tax, some don’t pay property tax, but they do have a cell phone and they receive city services. It’s not too much to ask for when you see what they’re getting for it.”

In today’s mobile, information-driven economy, wireless has become a critical tool. It empowers consumers with the ability to stay connected to family and friends and to participate in the new digital economy by taking advantage of applications and services that can be provided more effectively and efficiently through wireless technology, such as IT applications, smart grid technologies, online education and job search services. Given the critical nature of these services, it is counterintuitive for localities to claim that they need to ask wireless consumers to pay taxes above and beyond what they ask consumers of other goods and services to pay.

The House of Representatives wisely rejected the Government Finance Officers Association (tax collectors) claim that WTFA creates favorable treatment for the wireless industry. When WTFA is enacted, the beneficiaries of this legislation will be the more than 300 million wireless consumers who will have a little extra money in their own pockets each month.

Interestingly, now that H.R. 1002 has passed the House, these aforementioned organizations are advocating the need to reform the existing telecommunications taxes; however, from their perspective this means extending archaic “utility” tax statutes, statutes that have no rational basis for existing in today’s highly competitive environment of wireless services.

Since the passage of H.R. 1002 in the House a few weeks ago, numerous consumer, business and civil rights organizations have recognized the importance of WFTA and have endorsed the bill. This includes: the National Consumer League (NCL), Rainbow Push, the League of United Latin American Citizens (LULAC), SER-Jobs for Progress National, Inc., the Pan Asian American Chamber of Commerce and the Hispanic Chamber of Commerce.

In addition to providing wireless customers some financial relief from discriminatory taxes and fees for five years, the state and local governments, together with our members, can work collaboratively to modernize how states and localities tax wireless services, and reverse the ongoing trend of continuing to impose regressive taxes on what everyone agrees is an essential service.

The Commonwealth of Virginia took this proactive step in 2005, under then Governor and now Senator Mark Warner, when it enacted a flat 5% across the board telecommunications tax. As a result, Virginia has seen a steady increase in its telecommunications tax revenue from $395.3 million in 2006 to $424.5 million in 2009. That’s a win-win. More revenue for Virginia and its localities, and a little more money in the pocket each month for Virginia’s wireless subscribers.

House lead sponsor Rep. Zoe Lofgren said it best during her closing remarks on the House Floor before H.R. 1002 was approved, “As the national broadband plan said, wireless broadband is poised to become a key platform for innovation in the United States over the next decade. We should not let discriminatory taxes on wireless service disrupt this potential. Several years ago, we adopted a prohibition on discriminatory taxes on Internet access. At the time, I don’t think we fully realized that wireless was going to be the onramp for so many of our citizens to the Internet. And so we did not include it at that time. This (bill) is to correct that omission.”

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