Primer: H.R. 1002 – Wireless Tax Fairness Act of 2011

Tomorrow H.R. 1002, the Wireless Tax Fairness Act of 2011, will be up for passage under the suspension calendar. Here is a brief overview of the arguments that may be presented tomorrow supporting and opposing the bill.

H.R. 1002 – Wireless Tax Fairness Act of 2011

Legislation Considered Under Suspension of the Rules: Tuesday, November 1 st

Overview:

H.R. 1002 – Wireless Tax Fairness Act of 2011 (Sponsored Rep. Zoe Lofgren / Judiciary Committee) places a moratorium on all “new discriminatory taxes imposed on mobile services, mobile service providers, or mobile service property, during the 5-year period beginning on the date of enactment of this Act.” In the Senate, see S. 543.

Arguments in favor of H.R.1002:

1. In 2010, the average wireless federal/state/local tax and fee rates were 16.26 percent, compared to the average 7.42 percent general sales/use tax rates
2. High wireless taxes may slow investment wireless broadband infrastructure, reducing the economic growth and job creation associated with those investments
3. This higher tax rate affects low income families disproportionately
4. Consumer demand for wireless is price sensitive
   1. A 1 percent increase in price suppresses demand by 1.2 percent
   2. These taxes cost consumers over $21 billion annually
   3. Taxes and fees on wireless services have increased three times faster than general sales/use taxes

   Many of the supporting arguments reference this study released by Scott Mackey, Former Chief Economist with the National Conference of State Legislators, and many of the Bill’s supporters signed this letter.

   Supporters: 60 Plus Association, American Legislative Exchange Council, Americans for Prosperity, Americans for Tax Reform, Center for Individual Freedom, Citizen Outreach, Citizens for Limited Taxation, Competitive Enterprise Institute, Council for Citizens Against Government Waste, CTIA, Digital Liberty, Discovery Institute, Frontiers of Freedom, Independent Women’s Forum, Indian American Conservative Council, Less Government, MyWireless.org, National Black Chamber of Commerce, National Taxpayers Union, RightMarch.com, Small Business and Entrepreneurship Council, Smart Business Hawaii, The Latino Coalition, The Wireless Association, Verizon Communications, Washington Policy Center

   Arguments against H.R.1002:

   1. Reported wireless industry tax rates are inaccurate because they mix taxes and user fees
   2. Telecommunications companies pay “significantly lower corporate income taxes than other businesses”
   3. Wireless subscriber rates have grown from 194 million in 2005 (66 percent of the population) to 292 million in 2010 (93 percent of the population), demonstrating that tax policy is not suppressing wireless industry growth
   4. “The broader economics of the wireless communications industry [are] the reason for slower deployment in rural areas” rather than discriminatory tax rates

   Highlights from the letter sent by several public interest groups:

   • “It creates an uneven playing field and unfair competition for other communications service providers.”
   • “The bill would cause great damage to our system of federalism and the fiscal health of state and local governments while purporting to solve a problem – the supposed dampening effect of taxes on wireless service growth – that simply doesn’t exist.”
   • “If H.R. 1002 becomes law, Congress will continue to be flooded with demands from other industries, such as rental car and online travel companies, seeking exemption from state and local taxes”
   • “It is incumbent for all members of Congress to support their state and local partners and preserve their taxing authority”

   Opponents of H.R. 1002: Government Finance Officers Association, International City/Country Management Association, National Association of Counties, National Association of Telecommunications Officers and Advisors, National League of Cities, United States Conference of Mayors