April 16, 2008 12:47 PM PDT

House bill aims to ban new cell phone taxes

Posted by Kent German

A bipartisan bill introduced Tuesday in the House of Representatives would ban new state or local takes on mobile phone services for a period of five years. Sponsored by Rep. Zoe Lofgren (D-Calif.) and five co-sponsors, the bill is known as the Cell Tax Fairness Act (HR 5793 ).

In a statement, Lofgren said that between January 2003 and July 2007, the taxation rate on wireless services increased four times faster than the rate for other taxable goods and services. As a result, consumers pay 15.19 percent in federal, state, and local taxes on their cell phone bill, compared with 7.07 percent in taxes for most other goods and services.

"The Cell Tax Fairness Act will help ensure that consumers make choices about communications technology based on the merits of that technology, rather than on the rate of taxation," Lofgren said. The legislation "does not take away any existing revenue for state or local governments."

The bill, which is similar to Senate legislation introduced last year, would not affect current taxes, nor does it call for a ban on any new federal taxes. Furthermore, the ban would not apply to fees meant to subsidize emergency 911 services nor the universal service charge, which funds telecommunications infrastructure for low-income and rural residents. The federal excise tax on phone services, which was originally created to support the Spanish-American War, was dropped by the Internal Revenue Service and the Department of the Treasury in August 2006.

The wireless industry's lobbying arm, the Cellular Telecommunications Industry Association (CTIA), is supporting the bill, calling it "a step in the right direction." In its own statement, the association joined Lofgren in saying that a ban on new taxes would help encourage new innovation in the wireless sector. "We should do everything in our power to remove the roadblocks--such as excessive, discriminatory wireless taxes--that stand in the way of progress," said CTIA President and CEO Steve Largent.

Cell phones taxes and fees have been the target of a few bills in Congress since the Democrats regained control of the House, but lawmakers and the CTIA haven't always seen eye to eye. Separate bills in both the Senate and the House propose eliminating early termination fees and handset locking. The latter issue has become particularly controversial following AT&T's well-publicized lock on the iPhone, even though handset locking has been standard practice in the industry for years. Though the Senate bill won support from Senators in a hearing held in October, Largent and the CTIA have declined to support it, calling it "unnecessary."

Originally posted at News Blog