Feds cut off phone tax after 108 years

A tax imposed in 1898 to help pay for the Spanish-American War was finally terminated this year (2006!). This is old news now as the event passed with little fan fair. Instead it should have been greeted with parades and fireworks. This 108 year old tax should give us some idea of taxes ratcheting effect. They go up but they rarely go down and that is why every American should be concerned with taxes and how they are used. Does anyone reading this think Governments (both local and federal) are running at their most efficient, stretching every procurement, stretching technology and otherwise making sure every dollar spent is maximized? Almost all tax payers have to do these tasks daily but this is not true of Government. There is no incentive for Government to save money or maximize its use of money. If a Government spends millions on a project they tout the accomplishment but how often are Governments praised for innovation that saves money and reduces your taxes? The system is so configured that if a Government decides to save ‘real’ dollars, not those fake ROI dollars, they inherit all the risk with little reward. A prime example is Open Source software. Some Governments are taking on this challenge yet while they will save real money, they inherit with it all the risk involved and fake ROI studies. But I digress, back to taxes…

The 1898 tax was designed as a tax on wealthy Americans, back when phone service was considered a luxury. (This is another example why ‘tax the wealthy’ is not a good idea but a consumption tax will provided a ‘natural’ way to obtain this desire.) Another like luxury tax was imposed on those wealthy enough to own cellular phones not long past. Of course today almost everyone owns one and everyone is paying those luxury type taxes. I live in Florida and our tax rate for cell services breaks down like this - State & Local 16.10%; Federal 6.05% making for a total tax rate of 22.15%! (Also applying in every state is a 6.05% federal levy composed of an excise tax and a fee that subsidizes service to low-income homes and remote areas).

Of course this high taxing does not just happen on Cellular phones, it happens on long distance services. I recently reviewed my land line long distance service fees and here is the break down:

Florida Communications Serv. Tax (Gross Receipts) [2.37%]

Local Communications Services Tax [6.32%]

FCC Common Carrier Regulatory Fee [0.26%]

Network Access Charge [17.9%]

Federal Universal Service Fund Charge [10.5%]

That totals 36.85%!!

Why is this happening? Many state and local governments consider new cell phone taxes necessary to recoup money lost from a drop in the number of standard wired phones. The number of wired phone lines nationwide fell from 167 million in 2000 to 132 million in 2004, the Federal Communications Commission reports cell phone subscribers rose from 109 million to 182 million during that time.

My state is in the “Top 10 Worst Wireless Taxed States”. In fact we are number 2! Now that’s something to be proud of… I wish there were a “Top 10 Most Innovative States to Lower Taxes” chart. I’d be proud to live in a state that was number 2 on that list! To learn more: http://www.stopaddingtomybill.com

To be fair my State doesn’t have a State Income tax and that would make one think Florida is probably one of the least taxed places to live. In fact we are 39 out of 50 in State taxes which is good but our federal tax burden is 16 out of 50. Our total combined State and Federal tax burden is 31%, compared to a national average of 31.5% - surprising isn’t it!

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Florida
State-Local Tax Burden Compared to U.S. Average
(1970-2006)
Year	Total Tax Burden*		State Rank (1 is highest)
1970	0.298413		13
1971	0.293694		11
1972	0.302767		15
1973	0.294379		22
1974	0.291698		37
1975	0.274298		37
1976	0.283521		34
1977	0.28714		31
1978	0.291721		27
1979	0.294052		29
1980	0.290432		38
1981	0.294805		41
1982	0.293503		35
1983	0.282158		34
1984	0.285112		28
1985	0.291357		21
1986	0.295816		19
1987	0.305325		19
1988	0.304423		20
1989	0.301594		26
1990	0.297859		28
1991	0.296499		30
1992	0.29953		24
1993	0.302047		23
1994	0.309458		16
1995	0.311962		17
1996	0.319368		14
1997	0.327188		12
1998	0.331169		15
1999	0.329254		15
2000	0.3341		16
2001	0.323182		17
2002	0.295938		18
2003	0.288135		18
2004	0.288127		17
2005	0.303189		21
2006	0.309937		21
* May not add to total due to rounding.

Source: Bureau of Economic Analysis, Department of Commerce, and Tax Foundation Calculations.

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