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US House Passes Five-Year Ban On New Wireless Taxes

by Mike Godfrey, Tax-News.com, Washington

07 November 2011


The United States House of Representatives has passed the Wireless Tax Fairness Act of 2011, which looks to put a five-year restriction on any state or local jurisdiction from imposing a new discriminatory tax on mobile phone services or their providers.

So that US states and other local jurisdictions do not discriminate against providers and consumers of mobile services by imposing new selective and excessive taxes, or other burdens, on them, the moratorium under the Act states that no such state or local jurisdiction shall impose a new discriminatory tax on or with respect to mobile services, mobile service providers, or mobile service property, during the 5-year period beginning on the date of its enactment.

A study released earlier this year by KSE Partners looked at how wireless broadband users across the United States are said to face “excessive and discriminatory” federal, state and local taxes and fees on their bills.

It pointed out that, after several years in which taxes and fees on wireless users stabilised and even fell slightly, the trend toward higher impositions resumed between 2009 and 2010. Wireless users now face a combined federal, state and local tax, fees and charges burden of 16.3%, a rate two times higher than the average retail sales tax rate and the highest wireless rate since 2005.

The conclusion was that there is a mounting body of evidence on wireless broadband networks which suggests that state and local efforts to raise revenue from the wireless industry and its customers conflicts with the policy goal of increasing consumer broadband adoption.

Commenting on the House’s passage of the Act, its sponsor Zoe Lofgren (D - California) considered that the bill “is a common sense approach to tackling the rapidly increasing and discriminatory nature of local and state wireless service taxation. We need to encourage the development and adoption of wireless broadband, not tax it out of existence.”

She added that she was now hopeful that the Senate will take up and pass the companion bill that has not moved since it was put to the Senate Finance Committee in March this year.

One of the sponsors of that bill in the Senate, Ron Wyden (D - Oregon) issued the following statement in response: “Wireless is a prime example of how every time a new innovation hits the market – governments invent new ways to tax it. We should be encouraging wireless usage as it continues to revolutionize the way Americans work, study and interact with friends and family, and yet, the only products subject to more layers and higher levels of taxation in the US are alcohol and tobacco products.

Robert Atkinson, President of the Information Technology & Innovation Foundation (ITIF), stressed that “ITIF welcomes House passage of the Wireless Tax Fairness Act. This is the wrong time to slap new taxes on one of the most innovative and fastest growing segments of the economy. The expansion of wireless services and development of new devices and applications has helped create new businesses and stoked consumer demand for even more products and services. … Whatever revenue individual state and local governments receive from these discriminatory taxes in the short run, the nation as whole will be worse off in the long run as productivity, economic activity and consumer choice is held back. We hope the Senate moves quickly to advance this legislation to President Obama's desk."

TAGS: tax | business | sales tax | law | fees | legislation | United States | telecoms

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