US Lawmakers Plan Ban On New State, Local Cell-Phone Taxes
June 09 2009 - 2:57PM
Dow Jones News
U.S. lawmakers are setting the stage to halt state and local
governments from imposing new taxes on cell-phone and mobile e-mail
services.
Several Democrats and Republicans on the House Judiciary
Committee's commercial law panel agreed Tuesday that
"discriminatory" cell-phone taxes, or taxes on wireless services
alone, are unfair.
House members plan to act this year on a bill that would impose
a five-year moratorium on new state and local taxes for cell
phones. The bill would allow new taxes on general services that
include cell phones, but cell-phone use couldn't be singled out. It
also would preserve any existing state and local cell-phone
taxes.
The bill would be a boon to the wireless industry, particularly
small companies like Leap Wireless International Inc. (LEAP), which
specializes in low-cost cell-phone service.
The measure also could help other major wireless companies win
mobile Internet subscribers. AT&T Inc. (T), Sprint Nextel Corp.
(S), T-Mobile USA, a unit of Deutsche Telekom AG (DT), and Verizon
Wireless, a joint venture of Verizon Communications Inc. (VZ) and
Vodafone Group PLC (VOD), are all aggressively rolling out
high-speed mobile Internet networks around the country.
Some economists say increases in the cost of wireless services
cause customers to use fewer of them. Areas that may be more costly
for deployment could be ignored by service providers if taxes
continue to go up, they say.
"It's my belief that states and localities unfairly burden
cell-phone users," Rep. Trent Franks, R-Ariz., said at a hearing on
the bill.
Overall taxes on cellular service average roughly 15.2%, while
they average just 7.1% for other services, said bill sponsor Rep.
Zoe Lofgren, D-Calif. Lofgren suggested that the higher cell-phone
taxes disproportionately impact lower-income people, who rely more
on their cell phones for access to the Internet.
"Broadband Internet is a critical infrastructure. It's essential
to daily life," Lofgren said, noting the high priority President
Barack Obama has placed on Internet access.
"These tax rates are more in keeping with sin taxes, that's
taxes on cigarettes and alcohol, than general business taxes,"
Franks said.
Opponents of the bill say local cell-phone taxes aren't hurting
the wireless industry.
Verizon posted $1.65 billion in profits in the first quarter,
representing wireless revenue growth of almost 30%, said Joanne
Hovis, who testified at the hearing on behalf of several state and
local government organizations that dislike the measure.
AT&T plans to double its wireless data speeds by 2011, Hovis
added.
Given their strong position in the market, Hovis suggested that
wireless companies are seeking a "preferential tax treatment."
Information Technology and Innovation Foundation President
Robert Atkinson countered that it makes sense to impose
discriminatory taxes on products with adverse effects, such as
tobacco. But it's problematic to impose taxes on services that
bolster the economy, as wireless does, he said.
A similar measure is pending in the Senate.
-By Fawn Johnson, Dow Jones Newswires; 202-862-9263;
fawn.johnson@dowjones.com