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Congress, local governments split on new cell taxes

updated 04:05 pm EDT, Fri September 19, 2008

Cell tax bill controversy

A Cell Tax Fairness Act proposed in April by California congresswoman Zoe Lofgren has resulted in a Thursday debate at the House Judiciary Committee's subcommittee on commercial and administrative law between supporters and opponents of the bill, as per a Friday report. The bill, which would impose a five-year long suspension on new, discriminatory taxes on wireless services and providers, has many local governments concerned, as they consider taxing telecommunications providers in order to balance their budgets.

At the hearing, Lofgren and supporters of the bill argued the current 15.2 percent tax rate on cellphone services is twice as high as the sales tax rate, adding it disproportionately affects low-income consumers. Lofgren added the industry is key to increasing national productivity, and she is not handing the industry a break, but rather trying to promote affordable technology and mobile communications and Internet access to the masses.

She added her proposed bill is not the first such proposal, as a similar Internet tax moratorium was passed by congress four years ago, banning taxes on Internet connections such as DSL and cable modems. That bill was passed in order to encourage growth and innovation on the Internet, and the Cell Tax Fairness Act aims to do the same in the wireless provider industry.

Conversely, certain local government officials argue the legislation would unfairly constrain state and local governments' abilities to collect much-needed taxes. Opponents of the bill were split on its effects, however, as some see it as a way to promote tax reform in the telecommunications industry while others said it wouldn't because it gives preferential treatment to other industries and allows these same industries to ask for similar exemptions. It would thus put state and local tax revenue at risk.

Lofgren concluded her statement by saying that Bill HR 5793 has 130 cosponsors in Congress and the private sector.



By Electronista Staff
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