Archive » December 14, 2007

Stealth taxation: Part II

Have you looked at your utility bills lately?  Really looked?  Not at just the total amount, but more closely — at all the charges that are included?

Chances are you have not focused on the myriad taxes your phone and utility services collect from you.  If you have, you probably thought there really is not much, if anything, you could do about it.

 

In an October 2005 editorial, the Las Vegas Review-Journal noted, “The federal government first taxed phone service in the 1890s and has been taxing American phone bills in one way or another since the early 1930s.”

 

Federal excise tax

It started with the federal excise tax, now 3 percent, which currently brings in more than $5 billion a year to the federal treasury.  Originally imposed in 1898 to pay for the Spanish-American War, it has been abolished and reinstated numerous times, and consumers are still saddled with it more than a century later, long after it has fulfilled its purpose.

 

Other telephone taxes

Having discovered a good place to hide taxes from the public, Congress, along with a multitude of state, county and city jurisdictions, just can’t seem to resist the temptation to make the phone companies their tax collector of record for a wide variety of purposes.  For example, most states impose additional taxes on phone bills, with California’s Public Utilities Commission currently adding 3.9 percent to the ratepayers’ burden.

 

In a Wall Street Journal article, “New Taxes, Fees Hit Phone Bills” (September 18, 2002), Yochi J. Dreazen reported, “… city, state and local governments have imposed a jumble of taxes, fees and surcharges on telephone bills -- and increased existing charges in a quest for greater revenues. Federal regulators have let long-distance carriers add virtually any charges they want to a customer’s bill. Customers are baffled by their wireless and long-distance phone bills and are beginning to complain, authorities report.”

 

Following is a partial list of various taxes, categories of taxes or so-called “fees” that are currently “hidden” in our phone bills:

• Telephone Relay Charge and Relay Surcharge

• 911 Service Fee, State 911 Surcharge, Emergency 911 Surcharge

• State Maintenance Fee, Municipal Tax or Surcharge, Interstate Tax Surcharge, Statutory Gross Receipts Tax, State Tax/Surcharge, Utility Users Tax/Surcharge

• Universal Fund Surcharge, Federal Universal Fund, USF Line Charge

• End User Access Fee

• Number Portability Fee, NP Surcharge

• PICC charge, Carrier Access Recovery Charge

• Data Service Recovery Charge.

 

Internet access tax

There is also a relatively new tax known as the E-Rate program, which was added to phone bills about 10 years ago, for the purpose of subsidizing Internet access to schools and libraries. This levy, usually disguised as a “universal service” charge, has been raising about $2.5 billion a year.  The Las Vegas Review-Journal noted in an October 2005 editorial that a congressional oversight subcommittee concluded that the program “… is extremely vulnerable to waste, fraud and abuse, is poorly managed by the FCC, and completely lacks tangible measures of either effectiveness of impact.”

In addition to telephone services, electrical energy and gas utilities also are taxed. 

 

Where does the money go?

The state of Washington tells us, “The majority of the funds are distributed into the state general fund. A portion, however, provides financial assistance to local governments for maintenance of public works facilities.”

For those who may think the utility taxes we pay are not really a major item, in 1993, Alameda County, California adopted a policy that limits the total amount for the initial utility tax year to $5,500.  That’s not exactly a minor expense for the average taxpayer.

The public is largely unaware of the tax burden that is hidden in their utility bills, which is usually buried in state and local budgets to help finance general fund expenditures.

 

Other hidden taxes

Finally, in addition to all of the above, at least two other taxes are hidden in our phone and utility bills, namely, the property and corporate income taxes that are paid by the companies that provide these essential services. 

Most people usually do not view these levies as hidden taxes that are paid by the consumer, but corporate property and income taxes are always built into utility rates. 

We don’t see them because they’re passed along to customers as part of the cost of delivering services, rather than as an add-on charge that appears on our utility bills.

The myriad taxes that are levied on our phone bills are another particularly insidious way of taxing Americans without their knowledge or consent.  But, that’s just my opinion.

 

© 2007 Harris R. Sherline,

All Rights Reserved 

NOTE: Read more of Harris Sherline’s commentaries on his blog at “opinionfest.com.”