Tax Wars

Consumers of telecommunications services have been finding a surprise on their monthly bills: line items showing the taxes, mandates and fees imposed by federal, state and local governments to pay for a plethora of services that have nothing to do with improving the nation's telecommunications system. Depending on where you live, government mandates, taxes and hidden taxes add 20% to 30% to each monthly telephone bill -- wireline or wireless.

Yet as consumers contemplate this shock on their bills, CTIA and wireless carriers are working with congressional leaders to reduce those taxes.

Legislation to repeal one portion of the overall tax bite on wireless and wireline customers has been introduced in both the U.S. House of Representatives and the U.S. Senate by leaders on federal tax policy and telecommunications policy. Senate Commerce Committee Chairman John McCain has introduced Senate Bill 1909, and House Ways and Means Committee Member Jennifer Dunn, whois vice chair of the House Republican Conference, and Telecommunications Subcommittee Chairman Billy Tauzin have introduced H.R. 3648 to ease the tax burden on all Americans and American businesses that use a phone.

In the wireless industry, thanks to a competitive atmosphere, the average monthly bill for wireless telephone service has been reduced by $4.92, to $42.78, in just one year. But taxes, mandates and fees are eating up the competitive price reductions our consumers should be experiencing.

For the last several years, Congress and the Administration have been heralding a new dawn of competition for telecommunications. The first manifestation is the competition of five or more wireless carriers in each market, which has helped drive down the cost of wireless service.

The new competitive American marketplace requires that government change how it has, in the past, used phone bills to collect taxes. One of these, the Federal Tax on Talking, was first implemented in 1898 as a temporary tax on the luxury of telephone service to help pay for the Spanish-American War. This excise tax has been increased during wartime, yet lowered and even eliminated during times of peace.

Now, McCain, Dunn and Tauzin have introduced the Telephone Tax Repeal Act, and they are to be congratulated. The Federal Tax on Talking is today an archaic, regressive tax that hurts all Americans, and the poor among us are hit hardest.

In the fight against the Tax on Talking, CTIA is spearheading the industry effort to encourage members of Congress to fight for immediate repeal of the tax. Wireless carriers are, in turn, asking their employees, customers, suppliers, stockholders and others to get involved.

On a public policy issue as important as this, it is important for each one of us to do our part in this effort, which will bring significant bottom-line results to our customers and our companies.

But eliminating the Federal Tax on Talking is just the tip of the iceberg. The issue of outrageous wireless phone taxes and mandates is greater than any individual component of the overall tax bite on telecommunications services. Wireless phone customers are saddled with local antenna-siting fees, multi-jurisdiction taxation of the same roaming transaction, along with the costs of other federal mandates. These mandates include new wiretap requirements, enhanced 911 capabilities and the technical improvements needed to fulfill phone number "portability" from one carrier to another.

The government must not siphon competitive savings from the pockets of consumers. Wireless service has increased dramatically, and costs for using wireless telecommunications are down. In 1985, consumers paid nearly $100 each month for wireless service, and the average monthly bill now is less than half that amount. The wireless telecommunications industry sees the battle for new wireless subscribers based on competitive price. But because mandates, taxes and hidden taxes increase the final total on a consumer's bill, we are educating consumers about these add-ons in the democratic spirit of open disclosure.

With repeal of the Federal Tax on Talking, customers for telephone service will see immediate benefits on their monthly bills. Until then, telecommunications companies have the responsibility to let customers know the true costs of their services -- and to shed light on all the hidden taxes, mandates and fees that raise their bills. And we are doing so.