Wireless Consumers Don’t Deserve Double Dipping Landline Tax
February 16, 2015
By Douglas Kellogg, National Taxpayers Union Policy Manager
In the Palmetto State, there’s a battle brewing that could force millions of residents to pay higher taxes. Traditional landline phone companies are trying to prop up their sagging business models by extracting subsidies from wireless telephone consumers.
The battle could soon be decided in Columbia by the South Carolina General Assembly. The Senate is considering a bill that would make landline companies the victors and spell defeat for taxpayers.
Introduced last month, Senate Bill 277 aims to subsidize traditional landline phone companies by imposing a tax that would fall on the backs of 4.5 million wireless customers.
Because landline usage is in steep decline — with almost 40 percent of South Carolina’s families cutting their old service and relying solely on their cell phones —landline phone companies are petitioning for this new tax scheme, which would help them maintain a $42 million annual subsidy currently paid for by landline customers.
Why do landline phone companies say it’s fair to require wireless consumers to make up for declining revenues?
They argue that since wireless calls sometimes get connected through their networks, wireless consumers should be forced to pay for using those networks.
Here’s the trick: While it’s true that at times wireless calls get connected through landline networks, wireless companies do in fact pay local providers for that usage.
The idea that wireless consumers should pay a new tax for the use of these networks, when local phone companies are also charging wireless providers for the same thing, is unfair and amounts to double dipping.
The phone companies also oddly claim that S277 does not create a new tax; rather it creates a new fee. Really? The fact is: if you are a wireless customer in the state of South Carolina, and S277 passes, your bill will increase.
It doesn’t matter what they call it – tax or fee – it will hit wireless consumers where it hurts most.
Adding to the absurdity, S277 doesn’t require the local phone companies to show financial proof that they need the money, and it ignores the $100 million they currently collect annually from a federal subsidy program.
Nonetheless, the legislature is preparing to reach into the pockets of wireless users in the form of a tax (oh, sorry . . . a fee) in order to raise millions of dollars for other phone companies. And, they want to pretend that’s only fair.
It’s not fair. In South Carolina, about 16 percent of a typical monthly wireless bill is taxes and fees. This is roughly double the amount of tax for typical goods and services purchased in the state.
Some of these fees might be understandable, such as a reasonable charge to pay for the 911 system. But a new tax that goes straight to landline phone companies, so they can cover services that a declining number of consumers are choosing, is clearly unwarranted. This is what S277 would do, and it should be stopped.
South Carolina’s lawmakers are responsive to their constituents. Everyone who relies on their cell phone needs to let their elected representative know that this new tax proposal is unnecessary, fiscally irresponsible and unfair.
Users of wireless services already pay a hefty tax and fee burden. Ask your legislator to oppose forcing you to give your tax dollars to landline phone companies so they can provide a service that fewer and fewer South Carolinians want to buy.
Doug Kellogg is Policy Manager for National Taxpayers Union, “The Voice of America’s Taxpayers” (NTU.org), his writing has appeared in the Washington Examiner, Human Events, Townhall.com, and more. He also co-hosts NTU’s “Speaking of Taxpayers” podcast.
