House Approves Legislation to Preempt Local Government Taxation of Wireless Communications Services H.R. 1002, the Wireless Tax Fairness Act of 2011, would preempt the ability of state and local governments to tax wireless communications at a higher rate than other businesses for a period of 5 years. It would exempt taxes already in place before enactment, as well as taxes to support enhanced 911 emergency systems and universal service programs to provide cell service to rural areas. Attention has now turned to the Senate, where Senator Ron Wyden (D-Oregon) has introduced a companion measure, S. 543. GFOA members are urged to contact their Senators as soon as possible and urge them to oppose S. 543 and offer the following concerns: - S. 543 would have an immediate adverse impact on state and local government revenues and essential services. As landline subscribership continues to decline and wireless subscribership continues to grow, states and local government’s inability to extend their telecommunications or utility taxes to wireless services would leave them without tools to capture that lost revenue. This would mean significant additional cuts to essential services like police, fire and education that already have been hard hit by eliminations in federal assistance.
- S. 543 would single out the wireless industry for preferential treatment. The wireless industry would enjoy its own special immunity from state and local taxation. Congress will be flooded with demands from other industries, such as the rental car and online travel industries and other sectors of the communications industry, as well as any of a number of other industries, seeking similar preemptive relief from state and local taxes.
- S. 543 shifts the state and local tax burden to individuals and families. Businesses are generally heavier users of telecommunications and other utility-type services than residential users. S.543 would lessen businesses’ tax burdens at the expense of greater tax burdens on individuals and families.
- S. 543 is a solution to a problem that doesn’t exist. The wireless industry consistently inflates its state and local tax burden relative to other businesses by unfairly mixing taxes with user fees and failing to disclose that the industry pays virtually no corporate income taxes. Moreover, the wireless industry has yet to present any data indicating that state and local wireless taxes have had any adverse effect on wireless service subscribership, revenue or investment. Quite the contrary, the wireless industry has experienced 100% growth between 2006 and 2011, even as the industry complains about its state and local tax burden.
- S. 543 would damage our system of federalism. This legislation represents an unwarranted federal intrusion into the authority of state and local governments to make reasonable tax classifications, as it carves out one sector of the communications industry for favorable tax treatment, and takes away an important tool for state and local governments – taxation of the wireless industry – at the expense of other taxpayers and businesses.
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