Posted on 05/13/2005 8:32:50 PM PDT by neverdem
Last year, the City Council in Baltimore faced a budget shortfall so bad that it considered laying off 186 city police officers, reducing some fire department operations and scaling back trash collection. Then it found an untapped honey pot: cellphones.
Starting in August, the city began collecting $3.50 a month from each of Baltimore's 238,000 mobile phone subscribers. The extra income has helped to strengthen the city's finances and is expected to help the city fix up schools and trim the property tax.
"I can't remember the last time we've had such an easy budget year," said Sheila Dixon, the president of the City Council. "The bulk of our taxes come from property tax, but when you can't diversify and the federal and state taxes are drying up, you need other income."
Baltimore is not alone. The city of Springfield, Ore., for example, recently enacted a 5 percent tax on cellphones and land lines, which would help finance a new jail. Residents and utilities opposed to the tax, which is yet to take effect, have forced a referendum to be held on Tuesday.
Dozens of other cities and states have already passed cellphone taxes. Many other states and municipalities, including some in Louisiana and Missouri, are debating similar measures as they compile their budgets for the next fiscal year.
Officials are particularly eager to tax cellphones because the amounts individuals pay each month are small enough to go virtually unnoticed, but in aggregate can be substantial. Cellphone subscribers nationwide paid an estimated $17.8 billion in federal, state and local taxes last year.
But mounting taxes have led wireless companies like Verizon Wireless and Sprint to form unlikely alliances with consumer advocates and tax reformers to fight new city fees. They argue that consumers are taxed twice in states and cities that also impose sales taxes, and that the extra burden is particularly hard on retirees and low-income subscribers and also reduces overall demand for mobile service.
The cellphone taxes, when added to existing federal excise and state sales taxes, as well as fees for 911 service, mean that $8.75, or 16.7 percent, of the average monthly cellphone bill of $52.50 now goes to government agencies - about twice as much as on many other services, according to CTIA-the Wireless Association, a wireless industry trade group. While cellphone subscribers in New York, Connecticut and New Jersey pay some of the highest tax rates in the country, the states do not levy a wireless-only sales tax.
The carriers say they do not oppose collecting taxes on behalf of governments, but they object to being subject to special taxes as tobacco and alcohol are.
"We have no problem with the revenue needs of the localities," said Steven Zipperstein, general counsel for Verizon Wireless. "But we have a big problem that a certain class of customers or services should be singled out for excessive taxation."
Cingular Wireless, Verizon Wireless, Sprint and T-Mobile filed a lawsuit in February in Maryland Tax Court against Baltimore and Montgomery County, which has its own wireless tax. They contend the cellphone fee is effectively a sales tax, which only the state has the right to impose.
They also say that cities have no authority to collect taxes on services consumed outside their borders, noting that many of the cellphone calls made in Baltimore go outside the city limits.
"Some portion of what they are taxing is outside their boundaries, so it's defective for that reason," said Kenneth H. Silverberg, a lawyer at Nixon Peabody, the firm representing the carriers.
Others have joined the move to repeal the fee. At least one Baltimore councilman wants to exempt senior citizens from the wireless tax. Progressive Maryland, a nonprofit group that promotes "pro-working-family legislation," said Maryland lawmakers should raise the corporate tax and scale back taxes on consumers.
"When you have a thriving corporate sector paying less and less tax, the taxes get foisted on working and middle-class families," said Tom Hucker, executive director of the group.
The National Black Caucus of State Legislators called on state and local governments last December to roll back taxes, including flat taxes, on wireless services because they "disproportionately burden low-income, low-volume cellular telephone subscribers."
But a Baltimore municipal spokeswoman said the city felt it was on firm ground. The telecommunication tax was "crafted and implemented with the expectation that it would stand up to a legal challenge," said the spokeswoman, Raquel Guillory.
The tussle over the right to levy taxes on wireless services comes as phone providers and federal regulators struggle with how technology is changing the meaning of a phone call. Some lawmakers argue that to encourage the spread of new technology, new services should not be taxed as heavily as traditional ones. Others, intent on cutting and streamlining local taxes, want to limit the power of states and cities to introduce their own special fees.
Yet city councils and state lawmakers with budget holes to plug argue that "a phone call is a phone call," regardless of how it is placed. With consumers increasingly using cellphones instead of land lines, local governments are eager to start taxing wireless services just as they have taxed traditional phone lines for years.
In Baltimore, the $3.50 tax on cellphones extends to land lines as well. Businesses operating multiple phone extensions also pay 35 cents a line. Under the previous tax structure, the city charged a 12 percent tax only on land lines.
By moving to a flat fee for all phones, the city expects to raise $26.1 million in the fiscal year ending June 30, double what it received under the old formula. Of that total, $8.81 million, or 34 percent, will probably come from cellphone users, money the city did not receive before.
To be sure, the expanded phone tax is only one reason the city's finances have improved. Baltimore also nearly doubled its tax to record deeds and it expanded fees on utilities. The property market has also been booming in the area.
The income generated by Baltimore's broader phone tax has become a model for other cash-short cities. Council members in Portland, Ore., are debating whether to include cellphones for the first time in the city's utility license fee on phones. Cities in Missouri as well as the state legislature are considering similar measures.
Wireless companies point to Pennsylvania as a state with lofty taxes on cellular services. In 2003, lawmakers there extended the 5 percent gross receipts tax on land lines to include mobile phones. That tax goes on top of a 6 percent statewide sales tax.
Some cities in the state, like Philadelphia, have general sales taxes, too. Cellphone subscribers also pay into a fund for an emergency response system for wireless users. And then there is the federal excise tax of 3 percent. In all, taxes make up 19.05 percent of the average monthly wireless bill in Pennsylvania, one of the highest levels in the country.
Some state and local lawmakers are already thinking beyond cellphones. One idea is to create a uniform use tax that covers all forms of telecommunications: land lines, mobile phones, Internet-based phones, high-speed data lines and programming provided by cable and satellite companies. By spreading the tax to services like satellite television, which are subject to very little city or county taxes, the fees on phone services could be lowered.
"We've had a tax system based on technology as a utility for almost 60 years," said Steven J. Rauschenberger, a state senator from Illinois and the president-elect of the National Conference of State Legislators. "But with the convergence of technology, we need to rethink the system."
And of course tax fast food (Cleveland). And next air!
Bastards!!
Time to punish those who use cell phones.
You are not tied to any given location. There is no roaming.
Help Stop the Ridiculous Cell Phone Tax!
Join USA Next, a national taxpayer watchdog, in fighting this big government money-grab.
May 10, 2005
Dear Friend,
The law may prevent politicians from listening in on your cell phone conversations, but...
...that hasn’t stopped those same politicians from trying to cash in on your cell phone conversations!
It’s so absurd, it’s hard to believe.
But some politicians in the Missouri State Senate and local unelected bureaucrats are actually trying to force you to pay more for every cell phone call you make.
Call your spouse, you pay more.
Call your office, you pay more.
Call your friends, you pay more.
It’s very simple.
Right now you already pay federal and state taxes on your cell phone bill. Now, a number of cities in Missouri are trying to dramatically add to the local taxes you pay as well. And we’re not talking about a few pennies here and there.
We’re talking about local tax increases up to 500%!
Fortunately, some anti-tax leaders in the State House saw what these cities were up to and worked to quickly pass a bill to stop them. House Bill 209 as it’s known puts a strict cap on the taxes most cities – including St. Louis and Kansas City – can place on your cell phone bill.
Unfortunately, this important piece of anti-tax legislation is in jeopardy of being killed in the State Senate. If it is, you and I both know it won’t be long before cities all across Missouri start cashing in by jacking up the cost of your cell phone.
Your IMMEDIATE ACTION can help stop this – and help keep your cell phone bills from going up. Because you and I both know if we send it, they will spend it. USA Next is a national champion for taxpayers and their families. Together, we can stop this tax hike.
You can help kill this ridiculous tax NOW if you act today.
Sincerely,
Bill Brindley, Executive VP & COO
USA Next
P.S. If you'd like more information on USA Next and how you can increase your impact on this issue and many others, please visit our website at www.USAnext.org.
Last time I looked carefully at the cellphone bill, it totaled more than 25 percent taxes and "surcharges" (e.g., taxes by another name).
Taxman
------The Beatles
Let me tell you how it will be,
There’s one for you, nineteen for me,
‘Cos I’m the Taxman,
Yeah, I’m the Taxman.
Should five per cent appear too small,
Be thankful I don’t take it all,
‘Cos I’m the Taxman,
Yeah, I’m the Taxman.
If you drive a car, I’ll tax the street,
If you try to sit, I’ll tax your seat,
If you get too cold, I’ll tax the heat,
If you take a walk, I’ll tax your feet.
Taxman.
‘Cos I’m the Taxman,
Yeah, I’m the Taxman.
Don’t ask me what I want it for
(Taxman Mister Wilson)
If you don’t want to pay some more
(Taxman Mister Heath),
‘Cos I’m the Taxman,
Yeah, I’m the Taxman.
Now my advice for those who die,
Declare the pennies on your eyes,
‘Cos I’m the Taxman,
Yeah, I’m the Taxman.
And you’re working for no-one but me,
Taxman.
Note to readers, the Wilson and Heath referred to were the party leaders at the time, I believe Wilson was PM while Heath was opposition leader. The top tax rate was a whopping 95%, hence the one for the taxpayor and 19 for the taxman. An old English habit was to place a penny on each eye of the dead, which the taxman here is ordering declared as income. The po'd fab four were capitalist, not just in the record label sense.
Translation: "And now we can spend, spend, SPEND!"
The glee with which the NYT reports this turns my stomach. I'm still waiting for someone to come up with a way to measure the amount of urine you deposit in public restrooms - and tax accordingly.
They should slap a .50 tax on each copy of the NY Times, maybe their next little "We Love Taxes" piece will be a little less admiring.
Abandon the Cities......
Which is why a "multimedia device" that can do VoIP (e.g. Skype) will be your next phone.
I'm already on Vonage, and I'm told there either is or will soon be an Xten softphone for handhelds (with WiFi, of course).
Gizmodo reviewed the forthcoming Vonage WiFi handheld, but apparently it is crap.
In any case, it's coming. And when it does, the cellphone taxation stream (extortion) will be difficult to maintain when VoIP/WiFi service providers can be erected and torn down overnight, and are completely off the regulatory map.
We simply have too many gov't services and employees sucking up enormous amounts of capital and strangling freedom and productivity.
Killing the goose that laid the golden eggs is a time honored tradition among politicians.
You're right. I use Virgin Mobil, pay $20.00 every three months to keep the service, and now have about $120.00 in my account. That's $6.667/mo. vs. the $52 average mentioned in the article. I really wonder how many people actually use $52.00/mo. of cellular service, even though they certainly spend the money.
Another great way to save money on long distgance calling is to buy a Sam's Club calling card at about $.035/min. and get a chain dialing phone (most GE phones chain dial) that allows you to enter your access and account numbers with a minimum of key strokes. Saves massive amounts on long distance calling and avoids most of the access charges and taxes you'd otherwise pay. I don't even have regular LD service on any of my phones any omre.
What a b_tch she is for uttering that. I'm sure her cellular bills (and gasoline, etc, etc., etc.) are entirely paid for on the backs of city residents. And all her personal use calls are nicely included.
What a shame if she looses her post soon because of her big mouth...
Selective taxation as a pure revenue generator should be outlawed.
Rather than cutting back on fluff, they add taxes to the consumer.
Next budget crisis, they will have to invent a new way to tax us.
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