States Fighting Wireless Tax Bill in Senate

The National League of Cities is talking to the Senate Finance Committee, which has the companion bill (S-543), said NLC Director Lars Etzkorn. The group plans to broaden the conversation to the entire Senate, he said. It’s uncertain what cities may do to balance the budget offset by the loss of wireless tax if the bill becomes the law, he said, noting many cities haven’t seen economic recovery and are facing more budget constraints. The National Association of Counties is doing the same and plans to reach out to both parties, said Michael Belarmino, NAC associate legislative director. One of the biggest affects of the legislation would be the intrusion into state and local taxing authority, he said.

A big concern is that the five-year moratorium could become permanent, said Belarmino. The House passage came as a surprise, said Belarmino, noting the bill was offered before but has never gotten this far. “We have met with the Senate Finance Committee and will be meeting other key Senators” with hopes to block the Senate bill, said Tom Cochran, U.S. Conference of Mayors executive director. NATOA, International City/County Management Association, NAO, Government Finance Officers Association and Advisors, Conference of Mayors and NLC signed a letter to the Congress Monday opposing the legislation.

CTIA is working to get the bill passed in the Senate with support from both parties, said a spokeswoman. Rural Cellular Association President Steve Berry said he’s confident the Senate will pass it. The legislation would prohibit new regressive taxes that could discourage the use of wireless technologies, said Jonathan Spalter, chairman of Mobile Future.

Rep. Judy Chu, D-Calif., defended the state and local taxes during House floor debate late Tuesday. She said HR-1002 is a “special interest bill for the wireless industry.” It will deny states the “flexibility” to tax to pay for “essential services” like unemployment, and will force states to cut even more services, Chu said. The bill won’t result in more broadband, but its “vague” language will increase the chances of litigation, increasing legal costs for wireless service providers and state and local governments, she said. Labor unions including AFL-CIO, American Federation of State, County and Municipal Employees, and the International Association of Firefighters also opposed the legislation, they said in a recent joint letter to the Congress. State and local officials should be the ones determining local tax issues, the letter said.

Cellphones are taxed “at a far higher rate” than other items, including alcohol and tobacco, countered the bill’s sponsor, Rep. Zoe Lofgren, D-Calif. The taxes “fall particularly hard” on low-income Americans, who make high use of cellphones, she said. Lofgren said she understands the need of local governments to balance their budgets, but HR-1002 doesn’t get rid of existing taxes, she said. The bill still allows governments to pass broad taxes that don’t discriminate against wireless and allows discriminatory taxes if citizens vote for it, she added. State and local governments should not use wireless “as a revenue cow,” said Rep. Howard Coble, R-N.C. HR-1002 is a “Constitutionally sound, pro-consumer bill,” said Rep. Trent Franks, R-Ariz.

Sen. Ron Wyden, D-Ore., said he’s glad Congress is moving to stop discriminatory taxes against cellphones. “Wireless is a prime example of how every time a new innovation hits the market, governments invent new ways to tax it,” said Wyden, sponsor of the Senate companion (S-543). “New innovations have a hard time realizing their promise when they're buried under multiple layers of discriminatory taxes.”