EDITORIAL: The cell-phone tax burden

OPINION:

One thing all cell-phone bills have in common is a lengthy, confusing list of government taxes, surcharges and fees imposed at the local, state and federal level. These charges add up quickly. An average $48 monthly bill in Nebraska, for example, includes $11.35 in tithes to the bureaucracy.

That’s according to TaxAnalysts, a group that on Monday released a survey of the state-by-state burdens imposed on wireless communications. Economist Scott Mackey, who works with all the major mobile-phone providers, concluded that these taxes and fees are increasing and already exceed the levies piled on most other services. For instance, residents in Pico Rivera, Calif., pay the nation’s highest sales-tax rate of 10.75 percent on purchases. Washington state hits motorists with a 12 percent tax for parking in a lot and tourists with a 14.5 percent tax for staying in a hotel.

Those extractions from the public’s pocket are nothing compared to the 23.7 percent in taxes and fees found on Cornhusker State cell-phone bills. Nationwide, the average rate is 16.3 percent - a figure on the rise at the same time that President Obama is hitting the stump touting a national wireless initiative. “Within five years, we want to make it possible for businesses to put high-speed wireless services in reach of virtually every American,” Mr. Obama said in a Feb. 10 speech in Michigan.

The White House plan involves a long-overdue doubling in the amount of spectrum available for wireless broadband services, which frees up the airwaves for more high-speed Internet options on smart phones and other devices. Instead of letting the market work its magic, however, Mr. Obama had the Federal Communications Commission (FCC) hijack the Universal Service Fund (USF) to provide handouts for wireless handsets. Congress established the USF program in 1996 as a tax on metropolitan phone service for the benefit of land-line users in rural areas. The idea was to ensure that every American had access to a phone.

By any practical measure, that mission has been accomplished. The latest statistics indicate that 96.7 percent of U.S. households have phone service, an increase from 96.3 percent the previous year. The cost of the four-tenths of a percent improvement was $7.3 billion. Improvements to the performance figure can only be had after blowing our money in spectacular fashion. In 2008, the USF gave the Oregon Telephone Corp. a $16,834 subsidy for each of its customers in Beaver Creek, Wash.

Even an FCC press release admitted the USF was “wasteful and inefficient in some situations.” On Feb. 8, the commission voted to reform the 15-year-old program at the same time it opened the spigot for wireless subsidies.

This is a good example of the way Washington works. Instead of terminating one of the most abused and obsolete pork programs in the government inventory, the president is expanding its scope. As TaxAnalysts noted, USF fees account for the largest increase in the cost of providing wireless service to consumers. This tax and the other discriminatory levies on cell phones harm the industry’s growth. Before spreading around billions in taxpayer dollars to “stimulate” wireless options, it’s time to cut existing red tape. Slicing $11 from the monthly bill in Washington state, New York and Florida would be a good start to make cutting the cord a more affordable option.