Congress Debates Local Cell Phone Taxes

Published December 1, 2008

Hard economic times have prompted local governments to look for creative ideas to raise funds, including imposing taxes on cell phone use. But one federal legislator thinks that’s a misguided and unfair way to make up for local government budget shortfalls.

Rep. Zoe Lofgren (D-CA) has introduced the Cell Tax Fairness Act (HR 5793), which would place a five-year moratorium on any “new discriminatory taxes” on cell phone providers and services. The bill is working its way through the legislative process. Although it has garnered 140 cosponsors, it is not expected to come to the floor of the House this year.

At the bill’s initial hearing in April, Lofgren said the discriminatory taxes would adversely affect the growth of affordable broadband access, a problem that would especially affect low-income people.

Collection Complications

The telecommunications industry supports Lofgren’s bill and is standing against the idea of new taxes on technology. One objection experts raise is the difficulty of local governments targeting such a geographically ambiguous technology.

“Local tech taxes are a horribly bad idea,” said Bruce Abramson, CEO of San Francisco-based, a consulting company dealing with information policy issues. “I also think it’s kind of a strange thing to do. For instance, how would it be implemented?

“I have a 202 [Washington, DC] area code for my cell phone, but now I spend most of my time in California and Florida,” Abramson said. “There is no relation between my area code and where I pay my bill, so there are jurisdictional issues that will come up in trying to enforce the tax.”

Cell Phones Already Taxed

Also, mobile phone users already face an average sales tax rate of 15.19 percent, according to the Cellular Telecommunications Industry Association. But some experts oppose Lofgren’s bill, saying a moratorium on cell phone taxes could increase taxes on land lines.

“This seems to be going above and beyond what is necessary and seems unfair because it would give an advantage to mobile phones over land lines,” said Daniel Ballon, technology studies fellow at the San Francisco-based Pacific Research Institute.

“If taxes can’t be put on cell phones, they will be placed on land lines,” Ballon continued. “The governments will get their money somehow. I don’t think the government should be picking winners between technologies.”

Ballon also says Lofgren’s bill could be overkill anyway, because a law already in place established a five-year moratorium on Internet taxes—which would apply to cell phones that include wireless Web service.

Aricka Flowers ([email protected]) writes from Chicago.