Posted 8:22 pm Friday, April 24, 2009
Legislature Must Fix Excessive Texas Taxes
Here's something that should leave Texans speechless.
Telecommunications taxes in the Lone Star State continue to be far higher than the national average, and lag far behind technological developments and common sense.
It's an area in which lawmakers can easily provide consumers with some needed relief.
"Consumers in Texas face some of the highest telecommunications taxes in the United States. While significant progress has been made recently through the repeal of the Telecommunications Infrastructure Fee (TIF tax) and a reduction in Universal Service Fund fees, much remains to be done," say Bill Peacock and Chris Robertson of the Texas Public Policy Foundation. "The largest local fee remaining on most telephone bills, the municipal franchise fee, may be the next place for policymakers to reduce consumers' tax burden, along with the sales tax, which is applied to telecommunications equipment and fees in ways that amounts to double taxation for Texas consumers."
The TIF tax began to be phased out on Sept. 1, 2008.
"Eliminating this tax was long overdue," noted Peggy Venable, president of Americans for Prosperity-Texas. "It was one of the major accomplishments of the 2007 legislative session. It's a $600 million tax cut for Texans."
But other taxes and fees remain. Texans still pay an average tax rate of 18 percent on wireless phone service. Compare that to 6 percent they pay on hotels, 6.25 percent on motor vehicles, and 8.25 percent (on average) for sales taxes. Landline phone taxes are even higher, at an average of 21.05 percent.
"The telecommunications industry as whole is vital for the future economic growth in Texas," Peacock and Robertson contend. "High tax burdens and a litany of fees passed on to the consumer is not an efficient way to promote growth policies. Market conditions conducive to competition and innovation will help ensure consumer satisfaction and the expansion of services to rural and low-income areas."
One of the first things the Legislature should re-examine is the municipal franchise fee. Since 1999, the fee has cost Texans more than $4.6 billion. They're supposed to help local governments maintain the rights-of-way (ROWs) needed by utilities.
"However, there is a vast disparity between the costs of maintaining public ROWs and the volume of revenue taken in," the Foundation says. "Cities divert much of this revenue into their general funds."
Lawmakers should also look at the sales tax levied on non-retail telecommunications equipment (the antennas and such) -- another tax that gets passed along to consumers.
"All in all, consumers are fronting the bill for almost $400 million on average per year for equipment taxes; over a five-year period this will cost consumers almost $2 billion," Peacock and Robertson note.
Consumers are also "double taxed" when they pay sales taxes on retail telecommunications equipment, because they are paying taxes on taxes.
Laws and tax policies in Texas have not kept pace with the technological progress seen in the telecommunications industry. The Texas Legislature must not leave consumers on hold for another two years.
