Suffolk County in New York State has decided to impose a new tax on cell phone use as part of an effort to increase revenue.
Dan Aug, a spokesman for Suffolk County Executive Steve Levy, told reporters the county expects the measure, which also would increase the county tax on hotel and motel stays from 0.75 percent to 3 percent, to bring in $5.4 million in additional revenue annually.
Lawmakers are also considering a 30-cent monthly tax on cell phone bills to help fund municipal 911 services. That tax would raise an estimated $4 million per year, according to county officials.
The New York Legislature in July gave the county permission to levy the taxes, and Suffolk acted quickly, approving both measures August 4.
Seen as Revenue Grab
Cell phone taxes are becoming more popular among municipal governments desperate for resources because, in general, they do not require regulatory approval, and the devices themselves have gone from being luxuries to necessities.
“Clearly, raising taxes on the cell phone business looks to be a way government is looking to get more revenues,” said Jeffery Kagan, an Atlanta-based wireless and telecom industry analyst. “[The cell phone industry] is big and fat and juicy and growing and the future, so it’s a perfect target for governments to have in their crosshairs.
“Of course customers will not like this,” Kagan added. “Government has a way of spotting things people need and taxing the heck out of them.”
‘Poster Child for Misuse’
Industry watchers note cell phone taxes are often proposed to fund a narrow public purpose—such as 911 emergency services—but often get diverted to other uses.
“Chicago is the poster child for the misuse of these taxes,” said Jim Schueler, assistant vice president for state and external affairs at CTIA-The Wireless Association, a cell phone industry trade group. “Chicago charges a $2.50 cell phone tax, but a lot of that goes for funding security for the 2016 Summer Olympics. The last I heard, Chicago hadn’t won the bid yet.”
The only reason Chicago’s cell phone tax is only $2.50 is because it can’t charge more, Schueler added. Syracuse, New York imposed a $1.20 tax on cell phones, with only a nickel of it going to 911 system improvements.
“The funding mechanism in every state is different,” Schueler said. “In some states, there’s only a state fee, which runs as high as $3 in West Virginia. There’s plenty of money out there to handle 911, if it’s handled properly.”
Mishandled Tax Revenues
In many instances, as in Chicago and Syracuse, the funds aren’t handled properly, Schueler said. He pointed to a July 2009 Federal Communications Commission report to Congress showing many states have authorized use of the cell phone taxes for general fund purposes.
“Five states—Illinois, Maine, Oregon, Tennessee, and Wisconsin—report that they used money collected for 911 to assist in closing the state’s general fund, although Tennessee used only interest accrued on the collected funds,” the FCC report stated. “In its original filing, Wisconsin stated that it collected approximately $25 million in excess of actual requests for funds submitted by 911 grant applicants and that, while it has used some of the excess for administrative costs, it has not made a final decision on the balance of the money.
“Wisconsin stated in a further filing that the E911 funding program was established to recover the amounts needed to pay for approved grants given to counties/providers for E911 expenditures,” said the report. “When the program ended per state statute, the money collected exceeded the amount necessary to pay for approved grants. Excess money was then used for other needs in the state budget.”
In Rhode Island in 2008 approximately $13.6 million in cell phone tax revenues was used for purposes other than 911 services, the report added.
Phil Britt ([email protected]) writes from South Holland, Illinois.
For more information …
Report to Congress: On State Collection and Distribution of 911 and Enhanced 911 Fees and Charges, Federal Communications Commission, July 22, 2009: http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-292216A2.pdf
