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United States: Obama Eyes Cell Phone Tax Without Involving Congress

Monday, 19 August 2013   (0 Comments)
Posted by: Author: Mike Godfrey
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Author: Mike Godfrey

In order to boost ConnectED, his plan to place high-speed internet connections into United States schools, President Barack Obama is proposing that the Federal Communications Commission (FCC) should place an additional annual fee on each cell phone user, thereby by-passing the need for Congressional approval.

ConnectED, introduced by the President in June this year, is a five-year program to provide 99 percent of America's schools with high-speed internet connectivity, whereas, at present, only some 20 percent of students have that internet access. Its total cost is unknown, but estimates have put it at up to USD6bn.

To obtain funding for his project, however, rather than putting a further tax to Congress for approval, where it would be likely to raise Republican opposition, the President has proposed that the finance could be arranged directly by the Federal Communications Commission (FCC).

The FCC, which regulates communications by radio, television, wire, satellite and cable, already has the power to add charges on consumers to fund specific programs. In particular, it has an E-Rate program to expand access to telecommunications technology across the US, and it is proposed that, under that program, the FCC should impose an additional ConnectED fee on each US cell phone user of around USD5 per annum for the next three years.

When asked during a press briefing on August 14 whether President Obama was "making an end-run around Congress" by proposing that the FCC could decide on imposing the new fee, White House Principal Deputy Press Secretary Josh Earnest pointed out that the President is "not going to wait for Congress to act."

"He thinks (ConnectED) is an important priority," Earnest added. "And we have seen a little dysfunction in Congress. You would think that connecting schools to the information superhighway would be a pretty noncontroversial topic, particularly when it's something that could be accomplished through a relatively modest investment. Unfortunately, we haven't seen a lot of action in Congress, so the President has advocated an administrative, unilateral action to get this done."

He did emphasize, however, that the FCC is an independent body, and that making the investment in ConnectED and uprating its fees would be its decision, although the President considers it to be "a no-brainer."

It is reported that, while the FCC has already begun its examination of the President's proposal, a final decision could take up to one year. It can be expected that Republican politicians will have their say in pressurizing the FCC not to go ahead with what could be seen as the Administration setting a precedent by denying Congress the final decision on an item of taxation and expenditure.

In addition, a Tax Foundation analysis early this year found that US consumers already pay an average of over 17 percent in taxes and fees on their cell phone bill, including more than 11 percent in state and local charges. Its report discovered that 26 states have average state-local wireless taxes and fees in excess of 10 percent; and that, with federal taxes, some cell phone subscribers pay more than 20 percent in taxes. In Nebraska, the combined federal-state-local average rate is nearly 24.5 percent, and in six other states (Washington, New York, Florida, Illinois, Rhode Island and Missouri) it exceeds 20 percent.

It was pointed out that cell phones are already taxed at a much higher level than other consumer items, even as much as or more than alcohol or cigarettes, and that there has been widespread criticism of telecom taxes as "burdensome, regressive and stifling consumer choice."

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