House Approves Measure to Ban New Wireless Taxes, Fees for Five Years

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By Liz White  

The House Nov. 1 passed legislation that would put a five-year moratorium on new taxes and fees for wireless phone services.

The bill, the Wireless Tax Fairness Act of 2011 (H.R. 1002), passed under suspension of the rules via voice vote, sending it on to the Senate.

The vote was the first time the legislation came to the floor for a vote in either chamber although similar legislation has been introduced in the 110th and 111th Congresses.

The measure approved by the House includes two amendments that passed the Judiciary Committee in July. One amendment allows an exemption for wireless tax increases approved by voters within a given locality. The other requires studies to determine the impact of state and local taxes on mobile wireless costs and the impact of the moratorium on costs during the five-year window.

The companion bill in the Senate (S. 543) has not moved from the Finance Committee after it was introduced in March.

“We need to encourage the development and adoption of wireless broadband, not tax it out of existence,” said Rep. Zoe Lofgren (D-Calif.). “I'm hopeful that the Senate will take up and pass Senators Wyden and Snowe's companion measure, S. 543, so we can get this on the President's desk.”

State, Local Government Advocates Opposed

State and local governments have opposed the measure, citing concerns over the preemption of their taxing authority and their fiscal needs.

“This will deny states the flexibility to respond to the economic downturn during the moratorium and therefore undermine the ability of states to pay for essential services,” said Rep. Judy Chu (D-Calif.).

Proponents of the legislation have said that the wireless taxes essentially equal a “sin tax” because consumers can pay an average of 16.3 percent in taxes and fees at the federal, state, and local levels as opposed to 7.4 percent for other taxable goods and services.

However, Marty Morris, chief director of legislative affairs for the Federation of Tax Administrators, said the moratorium does not do anything to help solve the problem.

Under the moratorium, state and local governments are unlikely to change any relevant laws because it is unclear how the legislation would impact those changes, he said.

“This does not encourage people to equalize or reform or balance tax structures,” Morris told BNA.

Tax policy judgments should be imposed and decided at the local level and not by the federal government, he said.