[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
CELL TAX FAIRNESS ACT OF 2008
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
COMMERCIAL AND ADMINISTRATIVE LAW
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
ON
H.R. 5793
__________
SEPTEMBER 18, 2008
__________
Serial No. 110-209
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
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COMMITTEE ON THE JUDICIARY
JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California LAMAR SMITH, Texas
RICK BOUCHER, Virginia F. JAMES SENSENBRENNER, Jr.,
JERROLD NADLER, New York Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina ELTON GALLEGLY, California
ZOE LOFGREN, California BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas STEVE CHABOT, Ohio
MAXINE WATERS, California DANIEL E. LUNGREN, California
WILLIAM D. DELAHUNT, Massachusetts CHRIS CANNON, Utah
ROBERT WEXLER, Florida RIC KELLER, Florida
LINDA T. SANCHEZ, California DARRELL ISSA, California
STEVE COHEN, Tennessee MIKE PENCE, Indiana
HANK JOHNSON, Georgia J. RANDY FORBES, Virginia
BETTY SUTTON, Ohio STEVE KING, Iowa
LUIS V. GUTIERREZ, Illinois TOM FEENEY, Florida
BRAD SHERMAN, California TRENT FRANKS, Arizona
TAMMY BALDWIN, Wisconsin LOUIE GOHMERT, Texas
ANTHONY D. WEINER, New York JIM JORDAN, Ohio
ADAM B. SCHIFF, California
ARTUR DAVIS, Alabama
DEBBIE WASSERMAN SCHULTZ, Florida
KEITH ELLISON, Minnesota
Perry Apelbaum, Staff Director and Chief Counsel
Sean McLaughlin, Minority Chief of Staff and General Counsel
------
Subcommittee on Commercial and Administrative Law
LINDA T. SANCHEZ, California, Chairwoman
JOHN CONYERS, Jr., Michigan CHRIS CANNON, Utah
HANK JOHNSON, Georgia JIM JORDAN, Ohio
ZOE LOFGREN, California RIC KELLER, Florida
WILLIAM D. DELAHUNT, Massachusetts TOM FEENEY, Florida
MELVIN L. WATT, North Carolina TRENT FRANKS, Arizona
STEVE COHEN, Tennessee
Michone Johnson, Chief Counsel
Daniel Flores, Minority Counsel
C O N T E N T S
----------
SEPTEMBER 18, 2008
Page
THE BILL
H.R. 5793, the ``Cell Tax Fairness Act of 2008''................. 3
OPENING STATEMENTS
The Honorable Linda T. Sanchez, a Representative in Congress from
the State of California, and Chairwoman, Subcommittee on
Commercial and Administrative Law.............................. 1
The Honorable Chris Cannon, a Representative in Congress from the
State of Utah, and Ranking Member, Subcommittee on Commercial
and Administrative Law......................................... 10
The Honorable Zoe Lofgren, a Representative in Congress from the
State of California, and Member, Subcommittee on Commercial and
Administrative Law............................................. 11
WITNESSES
Ms. Gail W. Mahoney, Commissioner, Jackson County, Michigan,
Jackson, MI, on behalf of the National Association of Counties
Oral Testimony................................................. 19
Prepared Statement............................................. 22
The Honorable James F. Clayborne, Jr., Illinois State Senator,
Belleville, IL
Oral Testimony................................................. 25
Prepared Statement............................................. 27
Scott R. Mackey, Esquire, Kimbell Sherman Ellis, Montpelier, VT
Oral Testimony................................................. 31
Prepared Statement............................................. 33
Tillman L. Lay, Esquire, Spiegel & McDiarmid, LLP, Washington,
DC, on behalf of the U.S. Conference of Mayors, the National
League of Cities, the Government Finance Officers Association,
the National Association of Telecommunications Officers and
Administrators
Oral Testimony................................................. 41
Prepared Statement............................................. 43
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Letters of Support from the National Black Chamber of Commerce,
the Chamber of Commerce of the United States of America, and
the National Association of Neighborhoods (NAN)................ 13
Prepared Statement of the Honorable Lamar Smith, a Representative
in Congress from the State of Texas, and Ranking Member,
Committee on the Judiciary..................................... 59
Prepared Statement of the Honorable John Conyers, Jr., a
Representative in Congress from the State of Michigan,
Chairman, Committee on the Judiciary, and Member, Subcommittee
on Commercial and Administrative Law........................... 60
APPENDIX
Material Submitted for the Hearing Record
Answers to Post-Hearing Questions from Gail W. Mahoney,
Commissioner, Jackson County, Michigan, Jackson, MI, on behalf
of the National Association of Counties........................ 64
Answers to Post-Hearing Questions from the Honorable James
Clayborne, Illinois State Senator, Belleville, IL.............. 66
Answers to Post-Hearing Questions from Scott Mackey, Esquire,
Kimbell Sherman Ellis, Montpelier, VT.......................... 67
Answers to Post-Hearing Questions from Tillman L. Lay, Esquire,
Spiegel & McDiarmid, LLP, Washington, DC, on behalf of the U.S.
Conference of Mayors, the National League of Cities, the
Government Finance Officers Association, the National
Association of Telecommunications Officers and Administrators.. 72
CELL TAX FAIRNESS ACT OF 2008
----------
THURSDAY, SEPTEMBER 18, 2008
House of Representatives,
Subcommittee on Commercial
and Administrative Law,
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to notice, at 1:08 p.m., in
room 2141, Rayburn House Office Building, the Honorable Linda
Sanchez (Chairwoman of the Subcommittee) presiding.
Present: Representatives Sanchez, Lofgren, Watt, Cannon,
Jordan, and Keller.
Staff present: Michone Johnson, Majority Chief Counsel;
Norberto Salinas, Majority Counsel; Adam Russell, Professional
Staff Member; and Stewart Jeffries, Minority Counsel.
Ms. Sanchez. The Subcommittee on Commercial and
Administrative Law will now come to order. Without objection,
the Chair will be authorized to declare a recess of the
hearing. And I will now recognize myself for a short statement.
In a world where text messaging, Internet capability,
digital music and instant voice communication at the push of a
button are commonplace, wireless services are becoming more
prevalent than ever. In fact, over the last decade, the number
of cell-phone subscribers has quadrupled to over 250 million.
Not only have wireless phones become required for many
businesses, but they have also become ingrained in daily life.
Cellular phones provide a platform for friends to
instantaneously chat, for businesses to pitch proposals, and
for those who are in distress due to natural disasters, to make
emergency contact. Couple these benefits with cell phones' ease
of use and competitive pricing, and it is no wonder that the
public has quickly come to rely on them.
But as the popularity of cell phones has grown, the
wireless industry maintains that local and State tax rates on
wireless services have steadily increased. The wireless
industry has raised pointed concerns that local and State
governments have disproportionately raised these tax rates and
fees, when compared to other services and goods.
State and local governments generally dispute those
charges. They suggest that they are simply restructuring their
tax bases, in light of the trend away from landline
communication. Further, they contend that the tax burden should
not necessarily be applied evenly across different industries.
Many types of industries are subject to their own special
taxes, including not only tobacco and alcohol, but also travel,
hotels, entertainment, transportation and public utilities.
Today's legislative hearing will provide us with the
opportunity to hear testimony on the taxes and fees imposed on
wireless services and providers. The testimony will also assist
us in determining whether the tax-and-fee burden is truly
unfair, and not justifiable.
Additionally, we will examine H.R. 5793, the ``Cell Tax
Fairness Act of 2008,'' which seeks to impose a 5-year
moratorium on new, discriminatorily imposed taxes and fees on
wireless services and providers.
As we hear today's testimony, we must remember to balance
the competing interests concerning the issues addressed by this
legislation. As consumers, we want to pay lower taxes and fees
on our wireless services, but as legislators, we understand
that State and local governments need revenue to provide the
services we need and expect from them. Accordingly, I am very
much looking forward to hearing today's testimony.
[The bill, H.R. 5793, follows:]
Ms. Sanchez. At this time, I will now recognize my
colleague, Mr. Cannon, the Ranking Member of this Subcommittee,
and the lead Republican co-sponsor of the legislation, for his
opening remarks.
Mr. Cannon. Thank you, Madam Chair. It is a pleasure to be
here today.
And I would like to thank the witnesses for joining us at
this hearing.
The Chair may recall that, at the markup of the State Video
Tax Fairness Act in July, I requested that we hold one final
hearing on H.R. 5793, the ``Cell Tax Fairness Act of 2008,''
which was introduced by the gentlelady from California, Ms.
Lofgren, who is with us, here, today.
At the time that I asked for the hearing, the bill had 75
co-sponsors, including 12 Members of the Judiciary Committee.
Today, there are 130 co-sponsors, including 15 Members of the
Judiciary Committee. And, hopefully, when this bill comes up
for markup in the 111th Congress, we will have a majority of
the House as co-sponsors.
As you know, I am one of the 130 co-sponsors, and I support
this legislation because it is my belief that States and
localities unfairly burden phone consumers with excess taxes.
In my home, for instance, when my home phone rings, nobody
answers it, because all my kids know that if the call was for
them, it would be on their cell phone. And I know the same darn
thing.
So I occasionally answer the phone. And what do I end up
doing? Talking to people that want to talk to my wife, who
hasn't quite--well, actually, she does know how to text--but
she is not quite at the same level as the rest of the family,
technologically. She does have a cell phone.
In fact, maybe what I ought to do is start answering by
saying, ``Yes, my wife's cell-phone number is--do you have a
pen? Would you like me to text it to you?'' Because, other than
that--I mean, if I call home, it--it can ring 30 times before
we get the--in fact, we took off the answering machine because
nobody would ever listen to the messages.
So the world has changed. And nationwide, the average tax
rate on wireless services is now 14.14 percent, which is more
than double the average sales-tax rate for all businesses,
which is about 7.04 percent. These tax rates are more in
keeping with what we call ``sin taxes,'' that is, taxes on
alcohol and tobacco, than with a general business taxes.
And, you know, ``sin taxes,'' we sometimes say, ``are taxes
on the stupid.'' But this is just a plain tax on poor people--
let us say the most regressive tax--among the most regressive
taxes that we could possibly have, and suggests to the mind
that when we have the Federal telephone tax of 3 percent to
fund the Spanish-American War, which never went away. And, at
that time, it was, ``Let us tax those rich people who have
telephones.''
It is not rich people anymore. Everybody has telephones.
And what we really hope is that we empower people who don't
have as much money today, in the--because we want them to have
more money with new ideas and new technology, and a robust
economy tomorrow, as opposed to saying, ``We are just going to
tax everybody and take money from them.'' This is not like a
``sin tax'' in that most profound sense.
It is my understanding that these taxes on the wireless
industry are estimated to be nearly $5 billion a year. That is
an astounding number, and something that warrants the attention
of the Subcommittee.
In my time on the Subcommittee, I have seen many hearings--
and, in fact, I have Chaired many hearings--on the subject of
discriminatory State taxes. I know that discrimination, at
least in this context, is often in the eye of the beholder.
However, to my mind, imposing taxes on the wireless providers
that are more than double to the general business taxes are, by
definition, discriminatory.
In that regard, I am actually relieved to see that one of
our witnesses here today, County Commissioner Mahoney,
acknowledges that State and local taxation schemes have not
kept pace with changing technology. It is refreshing that we
can have at least a point of agreement in some cases. And
similarly, it is refreshing that State Senator Clayborne has
taken the position that a State's revenue is not sacrosanct,
and that it is possible to tax a class of business too much.
I know that many States are hurting financially. We just
read today my State's calling a special session to deal with a
$200 million budget shortfall. And I respect those concerns,
and the fact that this bill is going to further reduce tax
revenues. However, I think this legislation has many features
that will ensure that it does not diminish the State's
revenues; rather, it will merely require that States tax
business uniformly, going forward. I think that it is
worthwhile--a worthwhile purpose that--one that will benefit
consumers in the long run.
And, again, I would like to thank the Chair for exceeding
to my request for a hearing on this issue, and yield back what
time remains.
Ms. Sanchez. The gentleman yields back. And I thank him for
his statement.
I would now like to recognize my colleague, Ms. Zoe
Lofgren, the distinguished Chairwoman of the Immigration
Subcommittee, for her opening remarks on H.R. 5793, which she
introduced.
Ms. Lofgren. Thank you, Chairwoman Sanchez. And, just as
Mr. Cannon has requested this hearing, I also requested that
you have this hearing. And I am very appreciative that you have
carved out time to do this. I know that the schedule is
unbelievably tough. And I really wanted to thank you and credit
you for taking the time to do this.
I decided to introduce the Cell Tax Fairness Act because I
see that wireless services and mobile devices are going to play
an essential and, actually, a growing role in affordable
broadband access in this country. And the FCC has estimated
that in 2007, last year, 68 percent of all broadband
subscriptions were wireless subscriptions, which is an
astonishing percentage.
And given that the United States is slipping in broadband
penetration--the last I looked, we were 16th in broadband
penetration--it is important that we visit this issue.
The access to broadband is going to be accelerated with the
spectrum--the 700-megahertz auction. And so it is timely to
take a look at what impediments we have put into place for
broadband access.
I think it is important to note that the tax burden is
particularly significant for those who use wireless phones.
Thirty-nine million Americans have--wireless subscribers--have
incomes of less than $25,000 a year. And so if you take a look
at the need to penetrate broadband broadly through America, the
growing opportunity that the spectrum sale is going to give us,
and the fact that we are slipping, and still way behind,
especially among low-income Americans--this discriminatory tax
system that we have identified here, on cell phones--we
shouldn't even call them cell phones, because they are data
devices now--is very important.
Some have suggested that this is really a bill for the
telecommunications industry. And, as a matter of fact, I have
been on the opposite side of so many issues when it comes to
that industry, from net neutrality to spectrum policy, open
access and the like--this isn't about the cell-phone industry.
It is about the American people, who need to have access to
broadband. And taxes do have an impact, and impact behavior.
Now, I want to say just a word about local government,
because this is the last year I can say this. I served longer
on the Board of Supervisors of Santa Clara County than I have
yet to serve in the United States House of Representatives. And
I do know that the times are tough in local government. And
revenue is necessary for the essential services that counties
and cities do.
I am very sensitive to that. And I also know that local
governments are, you know, at the bottom of the feeding chain,
really, when it comes to local-government services. It all
rolls to you. And it is very tough to meet the obligations that
are so important.
I know that it is almost impossible to avoid taxing
something that you can tax, when you are facing the needs that
you have, which is why a Federal law is something we need to
take a look at.
Now, it is important to note that this bill, if enacted
into law, would not prevent--it wouldn't take any taxes away
that are currently in place. And it wouldn't prevent additional
taxation, provided that it was the same rate as other goods and
services. Because, if a local government needs to have a half-
cent sales tax, then it should apply broadly to whatever is
taxable in the State. In California, you don't tax food. Other
States do.
But for discriminatory taxes, there would be a time out, a
break. And I think that, as States and local governments
struggle with telecommunications-taxation policy, and we have
tried to do that with the Internet-tax moratorium and the like,
this time-out is highly necessary. Because if we don't do a
time-out, at the rate of taxation increase on cell taxes, we
are going to have a huge--an even bigger problem than we have
today.
So I want to thank, again the Chairwoman.
I want to thank Mr. Cannon and his staff for all their hard
work in making sure that the 130 co-sponsors are bipartisan.
This is not a partisan issue.
And I would ask unanimous consent to place in the record,
letters of support from the U.S. Chamber of Commerce, the
National Association of Neighborhoods and the Black Chamber of
Commerce, who have all asked that we support this bill.
Ms. Sanchez. Without objection, so ordered.
[The information referred to follows:]
Letters of Support from the National Black Chamber of Commerce, the
Chamber of Commerce of the United States of America, and the National
Association of Neighborhoods (NAN)
Ms. Lofgren. And with that, I will yield back, Madam
Chairwoman--again, thanks for this hearing.
Ms. Sanchez. I thank the gentlelady for her statement.
Without objection, other Members' opening statements will
be included in the record.
I am now pleased to introduce the witnesses on our panel
for today's hearing. Our first witness is Gail Mahoney.
Commissioner Mahoney serves as the county commissioner for
Jackson County, MI. She is also the deputy director for South
Central Michigan Works.
Commissioner Mahoney has served as both chair and vice
chair of the Human Services Committee, and as chair of the
Personnel and Finance Committee. Commissioner Mahoney is
currently a member of that committee.
Commissioner Mahoney has also been a member of the National
Association of Counties, Finance, and Intergovernmental
Steering Committee, since 1996. She serves on numerous boards
and commissions, including the Jackson County Fair Board, the
Armory Arts Alliance, Mid-South Substance Abuse Commission,
which she chairs, Region Two Planning Commission, Passages
Center for Women's Health of Foote Hospital, and the National
Association of Black County Officials.
Welcome, Ms. Mahoney, to our panel.
Our second witness is James--is it Clayburn or Clyborne?
Mr. Clayborne. Clayborne.
Ms. Sanchez. Clayborne. State Senator Clayborne represents
the 57th district of Illinois. Elected in 1995, he sits on
several committees, including the Senate Committee on the
Whole, Executive Appointments, Insurance and Pensions and
Investments Committees. State Senator Clayborne chairs the
Environment and Energy Committee, as well.
Prior to his election to the State senate, Senator
Clayborne was a partner at Hinshaw & Culbertson in Belleville,
Illinois, and served as a St. Clair County assistant State's
attorney.
Welcome to you.
Our third witness is Scott Makay--or, I am sorry--Mackey.
Pardon me. I just made you Irish. [Laughter.]
Mr. Mackey is a partner at Kimbell Sherman Ellis, KSE, and
assists clients in designing and implementing successful
strategies in State capitals. Mr. Mackey joined KSE in 2000,
and became a partner in 2005.
Prior to joining KSE, Mr. Mackey was the National
Conference of State Legislature's chief economist. There, he
spent 10 years working with legislative leaders on critical
State issues like the taxation of electronic commerce and
telecommunications-tax reform. Prior to joining NCSL, Mr.
Mackey was legislative assistant to U.S. Senator James
Jeffords, where he handled environmental issues and dairy
policy.
Our final witness is Tillman Lay. Mr. Lay is a partner in
the Washington, D.C. law firm of Spiegel & McDiarmid--did I
pronounce that correctly?
He has substantial experience in litigation and counseling
on telecommunications, cable television, anti-trust and
constitutional-law matters, before administrative agencies,
Federal courts and Congress.
For several years, Mr. Lay has represented and advised the
National League of Cities, the National Association of
Counties, the U.S. Conference of Mayors, the National
Association of Telecommunications Officers and Advisors, and
other local government organizations and individual
municipalities, on communications-tax-law matters.
He has represented municipal organizations in connection
with, among other communications-tax-law-related matters, the
Telecommunications Act of 1996, the Internet Tax Freedom Act
and its extensions, the Mobile Telecommunications Sourcing Act
of 2000, and previous bills in Congress to reform State and
local telecommunications taxes.
I thank you all for your willingness to participate in
today's hearing. Without objection, your written statements
will be placed into the record in their entirety. And we are
going to ask that you limit your oral testimony to 5 minutes.
You will note that we have a lighting system. And when we
remember to employ it, you will be given a green light at the
beginning of your time. You will get a yellow light when you
have a minute remaining in your time, and then, of course, when
your time expires, you will see the red light.
If you are caught mid-sentence or mid-thought, we will, of
course, allow you to finish that sentence or thought before we
move on to the next witness. So with that, I--and after each
witness has presented their testimony, we will have a round of
questioning from the Members here, subject to the 5-minute
limit.
So, with that, I am going to go ahead and invite
Commissioner Mahoney to please give us her oral testimony.
TESTIMONY OF GAIL W. MAHONEY, COMMISSIONER, JACKSON COUNTY,
MICHIGAN, JACKSON, MI, ON BEHALF OF THE NATIONAL ASSOCIATION OF
COUNTIES
Ms. Mahoney. Thank you Chairwoman Sanchez, and the
distinguished Members of the House Subcommittee on Commercial
and Administrative Law.
My name is Gail Wallace Mahoney, and I am a county
commissioner from Jackson County, Michigan, currently
completing my seventh term. I am also a member of the Board of
Directors for the Michigan Association of Counties, and also
the National Association of Counties, NACo. I am currently
serving as the chair of the Finance and Intergovernmental
Affairs Steering Committee.
I appreciate the opportunity to be before you today on
behalf of NACo, also the National League of Cities, the United
States Confronted of Mayors, the National Association and
Telecommunication Officers and Advisors, and the Government
Finance Officers Association.
We are witnessing an explosion in the telecommunications
technology. Every day, we see new products being introduced to
the marketplace; new, better, faster services being marketed to
America's public.
In a recent report from the FCC, it was stated that there
were 33.8 million cell-phone subscribers in 1995. Simply 12
short years later, we have seen a 700 percent increase, up to
255.4 million subscribers. Along with that explosion, we have
also seen an explosion in the companies' profits.
Even to the casual observer, it is clear that the current
tax statement of cell-phone services by the Federal, State and
local authorities has not hindered the product innovation and
services for financial growth. But that is not to say that the
improvements to the telecommunication-tax schemes can not be
made.
Local governments have called for comprehensive reform that
would ensure revenue's neutrality, and ensure that functionally
equivalent services that make use of different technologies are
treated in a similar manner. But the telecommunications-tax
reform should not be a disguise for Federal preemption of State
and local governments' taxing authority, nor does comprehensive
reform mean that a piecemeal approach would give preferential
treatment to any services, or a means of its delivery. That is
what H.R. 5793 will do.
Unlike the Federal Government, which has a projected
deficit of about $407 billion--really, we believe it is about
$700 million--most States and local government are required to
balance their budgets. This job has become more and more
increasingly difficult across the country, and in many
jurisdictions.
It is reported by the Center on Budget Policy Priorities
that at least 29 States face a combined budget shortfall of $48
billion for fiscal year 2009. California, alone, nearly has
about half that amount. It is expected that more States will
join that list in revenue forecasts updated, probably after the
election.
If the combined house collapse and ever-increasing number
of home foreclosures--throwing in a little bit of unemployment,
a stagnant growth in economy, a pinch of high fuel costs and a
dash of investment--bankruptcies from investment firms--you
have a recipe for economic mess, currently confronting State
and local governments.
To make up revenue shortfalls, many local governments find
themselves in a position of spending reserves, cutting services
such as fire, police, teachers, and also increasing taxes.
Jackson County's unemployment rate is higher than the national
average. We are reaching nearly an 8 percent increase in
unemployment. In addition, the county has been particularly hit
hard by mortgage foreclosures and, also, mortgage fraud.
Because of this situation, along with the downturn of the
national economy, we will have to make some significant
reductions in county expenses. We are looking at a possible
$1.5 million shortfall in 2009. As a county commissioner,
completing my 14th year, it is my job to make these very
difficult decisions. This is going to affect our coworkers,
people that I love and people that, you know, worked for the
county for over the past 14 years, that I have become
acquainted with.
These people are facing a possible 83 people we are going
to have to cut from our budget. That is why it is so important
that the officials actually do everything that they can to try
and provide an opportunity to have every revenue opportunity
that we can. We cannot afford to have anything taken off the
table.
Faced with these looming economic problems, the last thing
Congress needs to do is to enact legislation that would preempt
the taxing authority of State and local governments, especially
such preemptions that will result in the preferential treatment
of any one technology over another.
The true aim of this legislation is Federal preemption that
reduces the level of taxes that cell-phone industry pays the
State and local governments, and an increase to everyone else's
taxes. The consumers which have switched their services from
local landlines, now, to a cell phone--these revenues are
eroding the city and county's income.
This may force localities to rely even more heavily on
property and income taxes. Congress must not take actions that
will make an already-difficult job even harder.
Thank you for the opportunity to provide this testimony
today on behalf of NACo. And I would ask that my full written
statement be made part of the record. And I look forward to
answering any questions. Thank you.
[The prepared statement of Ms. Mahoney follows:]
Prepared Statement of the Honorable Gail W. Mahoney
Ms. Sanchez. Thank you, Ms. Mahoney.
At this time, I would invite Mr. Clayborne to give his
testimony.
STATEMENT OF THE HONORABLE JAMES F. CLAYBORNE, JR., ILLINOIS
STATE SENATOR, BELLEVILLE, IL
Mr. Clayborne. Thank you, Chairman Sanchez, Ranking Member
Cannon, and Members of the Subcommittee.
My name is James Clayborne. I am the assistant majority
leader in the Illinois State Senate. I am also a member of the
National Conference of State Legislator's Communication,
Financial Services and Interstate Commerce Committee, which
recently reaffirmed its Communications Policy Statement,
calling for fair and equitable taxation of communication
services.
Thank you for the opportunity to appear before you today to
testify regarding the importance of H.R. 5793, the ``Cell Tax
Fairness of 2008.'' To my constituents and the more than 9.5
million wireless consumers in Illinois, Congresswoman Lofgren
and Congressman Cannon, are to be commended for the broad
bipartisan support they have garnered for this bill.
As you might imagine, as a State senator--a State
legislator--my Federal bill limiting a State's ability to tax
is something I take quite seriously. Our system of federalism
provides State and local policymakers with the authority to
decide how the State should impose taxes on individuals,
businesses that reside within their jurisdiction.
The State's authority to impose that revenue--raise revenue
to fund government services is a concept that I strongly
support. However, I believe that another fundamental tenent of
our Nation's tax system is that taxes should be levied fairly
on citizens, particular in situations where multiple levels of
government may have the authority to tax.
One only needs to look at his or her own wireless bill to
see that there is nothing fair about the countless number of
taxes and fees that wireless customers pay today. H.R. 5793 is
a carefully crafted piece of legislation that calls for a
temporary 5-year time-out on any new discriminatory tax or fee
from being added on top of existing levels of taxes imposed
upon wireless services.
H.R. 5793 is entirely prospective, meaning that any tax or
fee that is currently being collected by States and localities
will continue to be collected. I believe that the prospective
nature of this legislation is extremely important because it
recognizes the revenue needs of States and municipalities.
Last year, the wireless consumers paid nearly $21 billion
to State, local and Federal Government. None of the $21 billion
would be rescinded under this legislation.
My focus here today would be to discuss how we got to where
we are today, and why I believe that taking a time-out from
additional discriminatory taxes imposed upon wireless consumers
is important to my constituents, and consistent with the
principles adopted by the NCSL.
The average rate of Federal, State and local taxes and fees
on wireless is 15.2 percent, compared to the average rate
imposed on goods, services--which is just over 7 percent--this
means the tax rate on wireless services are more than double
the rate on other goods and services.
Looking at my home state of Illinois, it is ranked the
ninth-highest in the country, with an average rate of close to
17 percent. A tax rate of 17 percent upon service that I
believe is critical to many of my constituents is a financial
burden. But imagine adding an additional tax on wireless
consumers.
Last year, Cook County, Illinois, which encompasses most of
the city of Chicago, sought to impose a $4-per-line-per-month
tax on communication services. There was no specific purpose
given to justify the tax aimed solely at communication
services. Rather, the revenue was going to be used to plug a
hole in the county's general-fund budget.
Had the proposed Cook County tax been added, the rate of
taxes and of fees on wireless services, if purchased by the
citizens of Chicago, would have increased to an average of 24
percent.
When the people of Cook County learned of the proposed tax
increases, 3,300 consumers took time to contact their county
officials to voice their opposition. The actions of these
consumers in Cook County demonstrate just how unpopular these
targeted wireless taxes are with consumers.
As we all know, wireless services are no longer considered
a luxury. For millions of Americans, these services are crucial
to their everyday lives, and yet they are taxed at levels that
are double or even triple the rates imposed on other goods and
services. Imposing regressive consumption taxes on consumers of
an essential service such as wireless disproportionately
impacts low and middle-income consumers, with--unfortunately,
can put this critical service out of financial reach for some
of my constituents, who need it the most.
Had the proposed tax by Cook County go into effect, the
Chicago residents will be paying an additional $12 on a $50
bill. Taxing on wireless services at that rate is more than
double the rate imposed upon goods and services--artificially
increases the cost of services, and which hurts the economic
gains that could be achieved by having a more rational tax
policy.
Over the past 8 years, NCSL has made communications-tax
reform a major priority for States to consider. The committee,
as well as separate tax force, has spent considerable time
educating state-policy makers on the need to simplify and
modernize the taxes imposed upon communications services. Even
though the communications-tax reform has been a major topic of
NCSL, little progress in achieving such reforms has been made.
I believe this Subcommittee is uniquely situated to address
the disparate tax treatment of an inherently interstate
service. As someone who comes from a State that imposes a 17
percent tax on wireless services, I know that once these taxes
are in place, it is very difficult to reduce them. Preventing
the imposition of new, additional discriminatory taxes on
consumers, while we try to fix the existing system, will be
both an economic benefit to consumers, and will also help those
who cannot afford a computer enjoy the benefits of wireless
broadband.
Last year, it was estimated that wireless consumers in my
State paid almost $1 billion in State, local and Federal
taxes----
Ms. Sanchez. Yes.
Mr. Clayborne [continuing]. And fees imposed upon their
wireless services. By anyone's measure, be it from State or
Federal perspective, that is a lot of money, from the one
subset of consumers, to pay on an essential service.
That is why I strongly support the passage and enactment of
H.R. 5793, the ``Cell Tax Fairness Act of 2008.''
Thank you again for this opportunity to speak to you today.
I would be happy to answer any questions you may----
[The prepared statement of Mr. Clayborne follows:]
Prepared Statement of the Honorable James F. Clayborne, Jr.
Chairwoman Sanchez, Representative Cannon, and members of the
Subcommittee, my name is James Clayborne, and I am the Assistant
Majority Leader of the Illinois State Senate. I am also a member of the
National Conference of State Legislator's (NCSL) Communications,
Financial Services & Interstate Commerce Committee which recently
reaffirmed its communications policy statement calling for fair and
equitable taxation of communications services.
Thank you for the opportunity to appear before you today to testify
regarding the importance of H.R. 5793, the ``Cell Tax Fairness Act of
2008'' to my constituents and the more than 9.5 million \1\ wireless
consumers in Illinois. Representatives Lofgren and Cannon are to be
commended for the broad bi-partisan support they have garnered for this
bill.
---------------------------------------------------------------------------
\1\ FCC, Annual Report and Analysis of Competitive Market
Conditions with Respect to Commercial Mobile Service: Twelfth Report,
FCC 08-028 (Feb. 4, 2008).
---------------------------------------------------------------------------
As you might imagine, as a state legislator, any federal bill
limiting a state's ability to tax is something that I take very
seriously. Our system of Federalism provides state and local
policymakers with the authority to decide how states should impose
taxes on individuals and businesses that reside within their
jurisdictions. The states' authority to impose taxes that raise
revenues to fund government services is a concept that I strongly
support.
However, I believe that another fundamental tenet of our nation's
tax system is that taxes should be levied fairly on our citizens,
particularly in situations where multiple levels of government may have
authority to tax. One only needs to look as far as his or her own
wireless bill to see that there is nothing fair about the countless
number of taxes and fees imposed upon wireless services today.
The purpose of H.R. 5793, precluding new discriminatory taxes from
being added on top of the existing excessive level of taxes imposed
upon wireless services, is an idea that is hard to disagree with. While
convergence, competition and the dynamic changes that have taken place
within the communications industry makes it critical for state
policymakers to simplify and reform the current state and local taxes
imposed upon all communication services and property, that goal is
going to take some time to accomplish. It makes sense that state and
local governments should not be enacting new discriminatory impositions
when policymakers and the industry are continuing to work towards
eliminating the ones that currently exist. Specifically for services
that consumers rely upon for their communication, information and
public safety needs
My focus here today will be to talk about how we got to where we
are today and why I believe that taking a ``time-out'' from having new,
additional discriminatory taxes imposed on wireless services is
important to my constituents and consistent with the principles adopted
by NCSL at its annual meeting.
HIGHLIGHTING THE PROBLEM
The tax structure imposed upon the communications industry today is
a carryover from the days when the industry was operated by Ma Bell as
a rate regulated utility. This tax structure was created well before
the first wireless call was ever made. As regulated utilities,
providers were subject to taxes under statutes applicable to ``public
utilities.'' The taxes imposed included gross receipts, franchise and
other industry-specific taxes that were then passed on to consumers in
the rates as part of the regulatory rate setting process. The phone
company never had to worry about the consumer looking for a cheaper
alternative because there was no competition in the marketplace. State
and local governments could tax telecommunication services at much
higher rates than any other goods and services without worrying about
an outcry from unsuspecting constituents, because ``it was just the
phone company raising rates again.''
Since the introduction of wireless services in the late 1980's and
the passage of the Federal Telecommunications Act of 1996, the
marketplace for communication services has changed substantially.
Communications services are no longer provided by only a single
provider, the ``rate-regulated'' utility. Consumers now have many
options to choose from for their communications services as a number of
extremely competitive industries bring innovation and change to
consumers at a rapid pace.
The wireless industry alone provides communication services to over
260 million consumers. That is a staggering number of consumers
enjoying the benefits of wireless mobility when you consider that only
fifteen years ago there were just 13 million wireless consumers. The
days of wireless services being considered a luxury that only the
wealthy can afford are over. Today these services are critical to my
constituents and, as with many other wireless consumers across the
country, are considered a necessity. Likewise, wireless broadband
services may be the only access that many consumers have to the
internet. For better or worse, we can all be ``connected'' 24/7 if we
choose to do so.
Unfortunately, the tax structure hasn't kept pace with all the
exciting innovation and technological changes taking place in the
industry. The January 2008 issue of Governing magazine stated ``And
yet, state tax structures, developed at a time when computers--
``thinking machines''--were the stuff of science fiction, and the
American economy flourished with the automobile industry, have failed
to evolve. To take one example, there is the outmoded way in which
telecommunications companies are taxed. A reliable, high-quality and
affordable telecommunications system is essential to the economic
competitiveness of states--to say nothing of the nation. And yet, these
systems are subject to very high taxation rates in a number of states--
by a tax approach set when the industry, dominated by one telephone
company, was highly regulated.'' \2\
---------------------------------------------------------------------------
\2\ Katherine Barrett & Richard Greene, Growth & Taxes, Governing
Magazine (January 2008).
---------------------------------------------------------------------------
Instead of undertaking the difficult task of reforming the tax
structure for the industry in total, the wireless industry and its
consumers have seen many of these antiquated ``utility'' taxes from the
last century simply extended to wireless services under the guise of
``leveling the playing field.'' I support this bill because I don't
believe that making the situation worse before we tackle the difficult
task of making it better for my constituents is the right answer.
The study published by Mr. Mackey earlier this year indicated that
the national average rate of federal, state and local taxes and fees on
wireless services is 15.19% compared to the average rate imposed upon
other goods and services of 7.07%.\3\ That means the rate of tax on
wireless services is more than double the rate on other goods and
services! When I look at my home state of Illinois, it is ranked the
9th highest in the country with an average tax rate of close to 17%. It
appears that we have some work to do to in my state to try to lower the
rate imposed on wireless services to the rate imposed upon other goods
and services, which averages about 8-9%.
---------------------------------------------------------------------------
\3\ Scott Mackey, Excessive Taxes & Fees on Wireless: Recent
Trends, State Tax Notes (Feb. 18, 2008).
---------------------------------------------------------------------------
A tax rate of 17% imposed upon services that I believe are critical
to many of my constituents is burdensome, but imagine adding an
additional tax on wireless services to that rate. I was very surprised
to learn that a County in my state actually attempted to do just that
last year. Cook County, Illinois, which encompasses most of the City of
Chicago, was seeking to impose a $4 ``per line, per month'' tax on
communication services. There was no specific purpose given to justify
the imposition of this tax solely on communication consumers--rather,
the revenue was going to be used to plug a hole in the County's general
fund.
Had the proposed Cook County tax been enacted, the rate of taxes/
fees on wireless services purchased by citizens in the City of Chicago
would have increased to, on average, a rate of 24%. Now, if consumers
in Cook County had the opportunity to approve this new tax, then I
might not question the fairness of it. However, the county council was
deciding for wireless consumers--the county was not going to put this
proposal to a vote of the people. After the wireless industry educated
its consumers about this new proposed ``phone tax,'' over 3,300
consumers took the time to contact their county officials to speak out
against this tax. The actions of these consumers in Cook County
demonstrate just how unpopular these targeted wireless taxes are with
consumers.
When you consider how important wireless services have become to
consumers today, taxing these services at such an excessive level is
counterintuitive to me. Rates frequently approach the level of so-
called ``sin'' taxes. Policymakers typically impose sin taxes when they
want to discourage consumption of certain products, such as alcohol and
tobacco. It is hard to understand why a service that many of my
constituents consider a safety lifeline is taxed at nearly 20% per
month. A rate meant to discourage usage, not encourage it.
I believe we all can acknowledge that communication services, and
wireless services in particular, are a vital component of this
country's economic growth and stability. Mr. Mackey cites several facts
in his testimony on the productivity benefits that the wireless
industry provides to the overall economy. It is hard to believe that
any reasonable policymaker would continue to think that imposing new
discriminatory taxes on wireless services is appropriate.
PROTECTING WIRELESS CONSUMERS FROM EXCESSIVE TAXES IS IMPORTANT TO MY
CONSTITUENTS
As has been mentioned before, wireless services are no longer
considered a luxury. For many Americans, these services are crucial to
their everyday lives and yet they are taxed at levels that are double
or even triple the rates of tax imposed on other goods and services.
Imposing regressive consumption taxes on consumers purchases of
wireless services disproportionately impacts low and middle income
consumers which can put this critical service out of reach for some of
my constituents that need it the most.
According to the Pew Internet & American Life Project, when
respondents were asked how hard it would be to give up a specific
communication service, cell phones received the top ranking over the
Internet and television.\4\ The Pew study also found that 84 percent of
English-speaking Hispanics, 71 percent of African-Americans and 74
percent of non-Hispanic white Americans have cell phones.\5\
---------------------------------------------------------------------------
\4\ John Horrigan, Mobile Access to Data and Information, Pew
Internet & American Life Project (March 2008).
\5\ Id.
---------------------------------------------------------------------------
As was stated before, wireless devices are being used to do far
more than just make phone calls. Wireless technology also provides
people with the ability to remain connected to friends, family and, in
this new information age, to be able to access the Internet. Recent
studies have shown that minorities constitute a growing proportion of
total demand for wireless, particularly the newest data services, like
broadband.
On a typical day, 77 percent of all Americans with cell phones have
sent or received text messages, taken a picture, played a game, sent or
received e-mail, accessed the Internet, recorded a video, played music,
sent or received an instant message, used a map, or watched a video on
their cell phone.\6\ Breaking down the details, the highest percentage
of use is from minorities: 90 percent of English-speaking Hispanics and
77 percent of African-Americans have done at least one of these
activities compared to 73 percent of non-Hispanic white Americans.\7\
---------------------------------------------------------------------------
\6\ Id.
\7\ Id.
---------------------------------------------------------------------------
Adoption of new technologies, in particular the use of wireless
phones and wireless broadband, has driven and improved productivity,
economic growth, and household income in the United States. Recent
studies have demonstrated that policies supporting affordable wireless
services that allow for increasing wireless use should lead to income
and productivity gains by all Americans, particularly low income
wireless users.
Whether it is a small business owner tracking orders ``on the go,''
an employee answering e-mails on a wireless device outside of the
office, or a family physician using a handheld device to input patient
information and prescriptions, wireless has delivered enhanced
efficiencies and greater convenience. Taxing wireless services at a
rate that is more than double the rate imposed upon other goods and
services is artificially increasing the cost of these services which in
turn hurts the economic gains that could be achieved by having a more
rational tax policy.
CONCEPT IS CONSISTENT WITH NCSL TELECOMMUNICATIONS TAX REFORM
PRINCIPLES
Over the past eight years, NCSL has made communications tax reform
a major priority for states to consider. The Committee as well as a
separate task force has spent considerable time educating state
policymakers on the need to simplify and modernize the taxes imposed
upon communications services as well as the benefits in doing so.
The most recent set of principles for communications tax reform
that have been unanimously endorsed by the NCSL are set forth below:
TAXATION OF COMMUNICATIONS SERVICES
Transaction taxes and fees imposed on communications services
should be simplified and modernized to minimize confusion, remove
distortion and eliminate discrimination regarding the taxability of
telecommunications services. The National Conference of State
Legislatures encourages elected policymakers at all levels of
government to work together to simplify, reform and modernize
communications taxes based upon the following principles:
Tax Efficiency: taxes and fees imposed on communications services
should be substantially simplified and modernized to minimize confusion
and ease the burden of administration on taxpayers and governments.
Competitive Neutrality: transaction taxes and fees imposed on
communications services should be applied uniformly and in a
competitively neutral manner upon all providers of communications and
similar services, without regard to the historic classification or
regulatory treatment of the entity.
Tax Equity: Under a uniform, competitively neutral system,
industry-specific communications taxes are no longer justified, except
for fees needed for communications services such as 911 and universal
service.
State Sovereignty: Other than the prohibition of taxes on Internet
access, NCSL will continue to oppose any federal action or oversight
role which preempts the sovereign and Constitutional right of the
states to determine their own tax policies in all areas, including
communications services.\8\
---------------------------------------------------------------------------
\8\ Unanimously passed the NCSL Communications, Financial Services
and Interstate Commerce Committee Business Meeting, November 28, 2007--
Passed on voice vote during the full NCSL Business Meeting November 30,
2007--Passed on voice vote during NCSL Annual Business Meeting, July
25, 2008.
---------------------------------------------------------------------------
Except for the very last provision addressing state sovereignty,
the concepts in H.R. 5793 are very consistent with this policy
statement. Under a uniform and competitively neutral system, industry
specific taxes are no longer justified. Unfortunately, without
proceeding with the reforms needed to the current tax structure, the
system will remain confusing and inequitable. Extending industry
specific ``utility'' taxes to wireless services is not the right
answer. The concepts in H.R. 5793 are intended to guard against having
the taxation of communications services become more onerous before the
reforms set forth in the NCSL policy statement can be implemented.
Even though communications tax reform has been a major topic at
NCSL, little progress in achieving such reforms has been made. One area
where we have seen moderate success has been in the simplification of
some of the existing taxes by reducing the number of returns
communications providers are required to file. Illinois was one of
those states, where several local impositions were consolidated into
one tax that is filed with the state, significantly reducing the number
of returns required to be filed that was required when returns were
filed with the local governments.
While the simplification effort was helpful, the state still has
not engaged in serious discussions with stakeholders about formulating
a plan to reduce the high rate of taxes imposed upon communication
consumers. Given the budget deficits that many states will be facing, I
believe it will be difficult to quickly accomplish the reform that is
required to reduce the existing excessive rates of taxes on
communication services any time soon.
Having said that, it is an issue that we must continue to focus on.
In the interim, we should ensure that no new discriminatory taxes will
be imposed on wireless services. As a state that currently imposes an
onerous tax burden on communication services, I can honestly state that
once these taxes are in place they are very hard to eliminate.
Preventing the imposition of new burdensome taxes on consumers while we
try to fix the existing system makes a lot of sense.
Last year, it was estimated that wireless consumers in the state of
Illinois paid almost $1 billion in state, local and federal taxes and
fees imposed upon their wireless services. By anyone's measure, be it
from a state or federal perspective, that is a lot of money for one
subset of consumers to pay on an essential service. That is why I
strongly support the passage and enactment of H.R. 5793, the ``Cell Tax
Fairness Act of 2008.''
Thank you again for this opportunity to speak to you today. I would
be happy to answer any questions that you might have at the appropriate
time.
Ms. Sanchez. Thank you, Mr. Clayborne.
We have just received notice that we have votes pending
across the street. But I think we do have time to have Mr.
Mackey give his oral testimony, assuming that you can squeeze
it in between the 5- and 6-minute mark.
STATEMENT OF SCOTT R. MACKEY, ESQUIRE,
KIMBELL SHERMAN ELLIS, MONTPELIER, VT
Mr. Mackey. Thank you very much, Chairwoman, and Members of
the Committee.
I will stay within my time. I just want to reiterate two
important points that Ms. Lofgren made during her opening
remarks.
First of all, this bill would not preempt any existing
taxes. So there would be no fiscal impact from this bill on any
State or local government that is currently, today, imposing
taxes--even discriminatory taxes--on wireless consumers.
And it would allow new taxes, provided that those new taxes
were not singling out wireless consumers, but were part of a
broad-based tax increase to meet revenue needs for local
government. So this bill only affects new discriminatory
taxes--the ones that, as we have heard, are burdening
consumers.
I am going to just skip over some of the things I said in
my prepared remarks, and just focus on a couple of things that
some of the folks claim that this bill would do, because I
think, in some of the testimony, some of the local governments
are claiming that we have not made the case that there is
excessive or discriminatory taxes on wireless consumers.
And as a side note, I would say, if there are no
discriminatory taxes imposed today, then governments have
nothing to worry about from this bill, because it only affects
discriminatory taxes.
In terms of whether there is a problem, NCSL, the
Governor's Association, Governing Magazine--many, many people
have said that there is, indeed, a problem. So I don't think we
can just say that this something--that the wireless industry
has somehow cooked the numbers to show that there is a problem.
There is a problem. And, you know, I would not tell a
consumer in Baltimore City, that has, you know, a typical $50
plan with two lines, that is paying $11.50 in taxes a month
versus if they walked into the hardware store and bought
something for $50--they would pay $2.50. Or, in Chicago, where
a same--similarly situated consumer--would pay $12 a month on
their wireless bill, and only pay $5 if they bought something
from the store. So, clearly there is a problem here.
But there is not a problem in every State. It is limited to
certain States that have really targeted wireless consumers.
As has been mentioned, these are regressive taxes. There
are many, many lower and moderate-income people that have plans
and--that, in particular--the trend toward a per-line charge,
instead of a percentage of your bill--is very, very burdensome
on lower-income people, who have multiple lines on the same
plan--family share plans and the like.
Consumers are really spending a lot, and, really, this
bill, as has been suggested, is about the consumer. The notion
that the local governments are willing to talk about reform,
and that this bill would actually discourage reform--I worked
on this issue for the last 10 years of my career, and the facts
would really suggest otherwise. When the industry and others
have sat down with local governments to talk about reform, we
have not been able to make any progress.
We are facing new taxes right now from local governments in
California, Oregon, Missouri, Maryland and New York. And one of
the reasons why we haven't had consensus on reform is, because,
to a lot of local governments, reform means, ``Let us make
wireless consumers pay all the taxes that are legacy from the
regulated era that are now being levied on the landline
phones.'' And reform means, ``Let us bring everybody up to the
highest level of taxation.''
And we think reform means, ``Let us bring everybody down to
a level that is being imposed broadly on all goods and services
that are subject to the tax, and not single out specific
services for those types of discriminatory taxes.''
And then, finally, the issue of, ``Why wireless? Why should
the Congress look at wireless as an industry that deserves--the
consumers deserve protection from new discriminatory taxes?''
Well, clearly, the wireless industry is federally licensed and
regulated. Congress and the FCC have set the rules and granted
the licenses that dictate how and where wireless providers are
able to sell their service.
So Congress is already heavily involved in this industry.
And it is a fundamentally interstate industry. I mean, this is
an industry where folks with wireless phones start a call in
one jurisdiction, can cross a boundary--and that, in fact, is
why Congress decided it had to get involved and actually make
the rules for allocating which jurisdictions were able to tax.
And that is the Mobile Telecom Sourcing Act that Congress
passed 5 or 6 years ago.
So, clearly, this is an interstate service, and the Federal
role is already well established.
And then, finally, more and more economic studies have
showed that wireless industry has a disproportionate share in
our economic growth. And if we are going to do the kind of
things that Representative Lofgren said, instead of--in terms
of setting the stage for new technologies, new ways that
American businesses and--are going to be more productive--then
we can't have taxes that discourage investment and force
consumers to have to choose not to adopt and purchase certain
services because the tax burden is too high, and they can't
afford to choose them.
So, in summary, thank you, again, for the opportunity to
testify. I look forward to questions. This bill is really about
protecting the consumer. And it needs to be passed. And I hope
you will move to a markup as soon as possible.
Thank you.
[The prepared statement of Mr. Mackey follows:]
Prepared Statement of Scott R. Mackey
Ms. Sanchez. Thank you for your testimony, Mr. Mackey.
At this time, we will recess to walk across the street to
vote. And we will resume the hearing as soon as the last vote
is finished.
[Recess.]
Ms. Sanchez. The Subcommittee will now come to order. And
we thank the witnesses for their patience while we were across
the street voting.
We are going to try to finish the hearing--have a thorough
hearing, but finish it within the hour, if possible, because we
are expecting another round of votes.
So I am going to just jump in very quickly, and ask Mr. Lay
to give his oral testimony.
STATEMENT OF TILLMAN L. LAY, ESQUIRE, SPIEGEL &
McDIARMID, LLP, WASHINGTON, DC, ON BEHALF OF THE U.S.
CONFERENCE OF MAYORS, THE NATIONAL LEAGUE OF CITIES, THE
GOVERNMENT FINANCE OFFICERS ASSOCIATION, THE NATIONAL
ASSOCIATION OF TELECOMMUNICATIONS OFFICERS AND ADMINISTRATORS
Mr. Lay. Thank you. Good afternoon, Chairwoman Sanchez, and
Members of the Subcommittee.
I am Tillman Lay, of the D.C. law firm of Spiegel &
McDiarmid, and I am testifying on behalf of the U.S. Conference
of Mayors, the National League of Cities, the National
Association of Counties, the National Association of
Telecommunications Officers and Advisors, and the Government
Finance Officers Association.
We oppose H.R. 5793. Its proposed moratorium on State and
local wireless taxes represents an unwarranted Federal
intrusion into the long-recognized authority of State and local
governments to establish tax classifications. And it would open
the door to other industry sectors asking for similar
preemption of State and local tax-classification authority.
The Supreme Court has long recognized that State and local
governments have broad discretion in the field of taxation,
where they possess the greatest freedom of classification. H.R.
5793 departs radically from this longstanding principle of
federalism.
It would single out one subpart of the telecommunications-
industry sector, wireless services, for preferential,
preemptive protection from State and local tax classifications.
That would set a precedent that would endanger State and local
tax authority and tax-classification authority in at least two
ways.
First, it would move us further away from State and local
government efforts at telecommunications-tax reform. The bill
would require that State and local governments treat wireless
services more preferentially than their landline-
telecommunications-service competitors. Narrowing the
permissible tax base for telecommunications to landline service
would put upward pressure on State and local landline-
telecommunications-service taxes, and, likely, on State and
local public-utility taxes as well.
Second, the bill would set a dangerous standard for Federal
intervention into State and local-government tax
classifications. If taxing any industry sector or service at a
rate different from the general business-sales-use tax rates
constitutes a discriminatory tax, then there would be no limit
at all to Federal preemption of all State and local tax
classifications.
And you can expect other industries that are subject to
different, and, often, higher, State and local tax
classifications, such as the utility, petroleum distribution,
entertainment, transportation and other industries, to ask
Congress for similar preemptive relief from State and local tax
classifications.
Moreover, the legislation is a solution in search of a
problem. Supposedly excessive State and local wireless fees and
taxes notwithstanding, the wireless industry has enjoyed
remarkable growth in terms of subscribership, revenues, and
investment--over the past 7 years.
According to the FCC, wireless-industry subscribership has
grown 158 percent since 2000, and wireless-industry revenue has
grown 124 percent over that same time period.
The wireless industry's claim of excessive taxes and fees
are based upon an apples-and-oranges mix of Federal, State and
local fees and taxes, many of which would not be affected by
H.R. 5793 at all.
CTIA has claimed that about 15 percent of each customer's
monthly bill already goes to taxes and fees. But this 15
percent figure includes Federal taxes and Federal Universal
Service Fund charges. The 15 percent figure also includes State
Universal Service Fund and State and local 911 fees--two more
categories of fees that the bill exempts from its reach. And
the 15 percent figure also includes State and local general
sales-and-use taxes, which, of course, would also not be
subject to the bill's moratorium.
By singling out State and local wireless taxes for
preemption, industry is seeking to shift all of the blame and
all of the fiscal burden to local governments and their general
funds, not for the taxes they have imposed, but for the various
user fees imposed by the Federal and State and local
governments that the bill would not preempt.
Eight years ago, local government organizations and the
wireless industry worked together to develop and support the
enactment of the Mobile Telecommunications Sourcing Act. The
MTSA assures political accountability. A State or wireless tax
will end up being paid by the constituents of the State or
local government that imposes the tax.
No elected official enjoys imposing or increasing any tax.
And that is just as true of State and local elected officials,
as it is Members of Congress. There is one difference, however.
State and local governments must balance their budgets. And
political accountability ensures that if State or local
government constituents who pay a wireless tax feel that that
tax is excessive, there is a very effective cure. It is called
the ballot box.
H.R. 5793 violates all principles of political
accountability. It would enable the Federal Government to place
a preemptive ceiling on State and local taxing authority, while
leaving to State and local elected officials the difficult task
of deciding what other taxes to raise or what services to cut
to compensate for action that the Federal Government, not they,
took.
We, therefore, ask that the Subcommittee vote against
approving H.R. 5793. Thank you for your time. And I would be
happy to answer any questions you may have.
[The prepared statement of Mr. Lay follows:]
Prepared Statement of Tillman L. Lay
Ms. Sanchez. Thank you, Mr. Lay. We appreciate your
testimony.
We will now begin the round of questioning. And I will
recognize myself first, for 5 minutes of questions.
I am going to start with Ms. Mahoney.
If Congress were to pass this legislation, what impact
would it have on State and local revenues?
Ms. Mahoney. One of the issues is, for me, and for
Michigan--if the Federal Government decides to limit this tax,
the way we collect our current fees or try and balance our
budget--for instance, you know, for me, if we were to have what
Illinois has, at 17 percent, I think this would be a really
good idea. But we don't.
And, if, for our constituents and the people within our
State--to keep fire departments going, to keep police stations
going--and we are able to say to our constituents, ``We need
this tax for that reason--you know, to increase 1 percent
versus laying off police officers.'' I think that we should be
able to do that.
And those are the kinds of things that I think--imposing it
from a Federal level preempts us from being able to do that.
Ms. Sanchez. Thank you, Ms. Mahoney.
Mr. Clayborne, what do you hope to accomplish with the
passage of H.R. 5793, and the 5-year moratorium? Because I am
interested in knowing if this 5-year moratorium will actually
just sort of lead the movement toward a permanent moratorium,
or a ban on all taxation of wireless services.
Mr. Clayborne. I think what, essentially, happens is that
you force the State, local and county governments to come
together to begin to address this issue.
Obviously, if we continue to--if this bill does not pass,
then if every county in the State decides to raise it by 2
percent--there are 102 counties in the State of Illinois. That
tax will continue to go up. And it is obviously a burden on the
poor.
So we believe that the moratorium----
Ms. Sanchez. Do you see it, primarily, as a leverage to try
to get people to sit down and talk about some real reform?
Mr. Clayborne. That is correct.
Ms. Sanchez. Okay.
I am just interested in knowing from you, Mr. Clayborne--as
the Chairman of the Subcommittee, I have had various industries
come to me to say, ``We are being discriminated against in
terms of taxes.'' And just some of the industries that have
come to ask for relief are the hotel industry, the car-rental
industry, the satellite-television industry, Internet-access
providers and big businesses, among several others.
So I am interested in knowing your perspective. You know,
why the carve-out for wireless, and not all the other
industries that are coming to ask for the same kind of relief?
Because the cumulative effect, I believe, if we were to say,
``Yes,'' to everybody, would be what Ms. Mahoney has mentioned;
that, budgets for fire departments and police departments would
be particularly hard-hit, especially at a time when, I believe,
most States are facing huge economic problems.
Mr. Clayborne. I think it is--the distinction between the
other entities that you discussed is the fact that most of
those are actually luxury. This has become essential.
As Ms. Lofgren had stated--Congresswoman Lofgren stated--
``At my house, no one answers the house phone, because if you
are intending to call my sons, then you either text them or you
call them on their cell phone.'' So it has become essential
item in our daily use.
I have two sons in college. I don't even know the number to
the dorm room, because they won't answer it. This has become
such an essential part of communicating, between texts, emails,
as well as the actual phone itself. So that is the difference.
Ms. Sanchez. That is the distinction? Okay.
Mr. Lay, in his written statement, State Senator Clayborne
suggests that it would be difficult for State and local
governments to reform and reduce excessive rates of taxes on
communication services. And that is sort of the justification
why Federal legislation is necessary.
Do you think that passage of this 5-year moratorium would
lead to effective reform?
Mr. Lay. No, I don't.
The difficulty is this: As I recall in his answer--and
maybe you are confusing his with Mr. Mackey's--the view of
telecommunications-tax reform that industry has, as the only
acceptable reform, is that industry be taxed just--just be
subject to a generally applicable sales-and-use tax, no
differential tax rate. And that is the difficulty.
I don't think the moratorium would result in that. In fact,
for fiscal reasons, it would probably force local governments
to raise taxes on landline telephone, which is a shrinking tax
base, because that is all they would have left. They can't
increase or extend the telephone tax to wireless service
anymore.
Ms. Sanchez. Okay. Thanks.
Mr. Lay. They would put us further away.
Ms. Sanchez. Thank you, Mr. Lay.
My time has expired, so I will recognize the Ranking
Member, Mr. Cannon, for 5 minutes of questions.
Mr. Cannon. Thank you, Madam Chair.
And, you know, I was just sitting here, thinking. I had
said earlier in my opening statement that these are regressive
taxes. I think that is particularly difficult because I
actually think that you are not smarter because you are rich.
And if we want to tap into the genius of people who are not yet
rich, you have to give them access to systems.
And my understanding is that there are some jurisdictions
that are taxing cell phones like $1.50--in some case, even more
than that--per line. So in the case of my family, I have a
family plan. Actually, we have a big family, so we have two
family plans. And each additional person we put on that family
plan costs about $5 for the plan.
And I see Mr. Mackey is nodding his head. Apparently, that
is common. And, you know, if you add $1.50 tax on that line,
that is like a 30 percent tax for that phone.
And, now, I bought my 10-year-old, now, a phone when she
was 8, because I figure that is one of the best ways to protect
her. You know, she can dial, or we can locate--if she keeps the
phone with her and she gets lost, we can locate her with,
perhaps, the phone GPS system.
So there are a lot of reasons to have a phone, but if you
start putting a 30 percent tax on it, at some point, you
actually really affect people's ability to buy that, especially
when you are in a--when your incomes are more marginal.
I am in--you know, late in my career, as opposed to a young
family that has two or three kids, and that tax could be more
significant.
Does that bother you, Mr. Lay, that we could be taxing at
those kinds of rates on services that are profoundly important
to the development of society?
Mr. Lay. Well, I would first say that the fee you are
talking about--and this is based upon Mr. Mackey's table--to
say that it is common is not accurate--that a tax of that level
is not common.
Mr. Cannon. No, I don't think I said it is common. I just
said that that is one of the fees, and that, you know----
Mr. Lay. And, well, there is--I mean, I suspect--I guess my
reaction to that is, one, that would not happen unless the
voters who pay that tax allowed elected officials to do that.
There is an effective check on that.
The other question that I----
Mr. Cannon. Let us go to that point, because, you know, my
family has been through a number of plans over time, as almost
everybody has, because it has been a pretty volatile market.
So we ended up, at one point in time, where we had two very
different plans. And within those plans, the bills went to
different addresses. So my wife's phone went to my home address
and my phone, which was the same phone, went to my business
address.
And the bill was significantly different on my wife's
phone--higher. And the reason for that was because the local
city taxed it at a much higher rate.
And so it seemed to me that the only way to solve that was
to move the address for the billing for her phone into my
business, which, by the way, saves a lot of inconvenience
anyway, because sometimes she doesn't get around to paying the
bills, and my office does.
But I guess my point there is that people actually don't--
they are not going to change their elected officials over that
kind of a thing. And, frankly, if--they may not even know about
it or know what their bill is, compared to other people.
Normally, they just take the bill and write out a check for the
bottom line.
Now, that doesn't mean it doesn't have an economic effect.
But to say that voting is the way to change your phone bill
seems to me to be a pretty tenuous relationship.
Mr. Lay. Only if you say that it is tenuous, not just--if
that is a statement that, basically, you can't count on the
democratic process to protect against excessive taxes as--do
people want to tax themselves? I would suggest that is a
question of the basic form of democratic government. I mean,
that is what we have.
Mr. Cannon. Okay.
Well, then, let me ask it this way: If you think that local
voters should protect themselves by who they elect--I agree
with that--is there a role for the Federal Government in
eliminating the discriminatory taxes, especially in a case like
cell phones, where you have this national market?
I mean----
Mr. Lay. I think there is a national market for lots of
goods and services--petroleum distribution, electric, gasoline.
All are subject to taxes that, under this definition of
discrimination, would be called discrimination.
I would say----
Mr. Cannon. And we are working on several of those that you
have just mentioned, of course.
Mr. Lay. Yes.
And, I guess, where I would have a problem is the notion
that the Federal Government has the power, in our
constitutional system, to, basically, rewrite and mandate all
the State and local tax codes in this country.
You have to remember that State and local governments,
unlike the Federal Government, rely primarily on transaction
taxes. The Federal Government relies more on income taxes. And
on the issue of regressivity, I would suggest to you that,
although all transaction taxes are somewhat regressive, utility
and telecommunications taxes are actually a bit less regressive
than general sales taxes, because their burden falls relatively
more on businesses relative to residences.
So if you shift it----
Mr. Cannon. I see that my time has expired.
But let me just point out, in response to that last point,
that that is generally true. But the nature of
telecommunications is different from the nature of electricity
and other kinds of services like that, in that communication is
the foundation for progress for people. That is individual
progress I am talking about. And, therefore, the regressivity,
I believe, that is reflected in these kinds of taxes on cell-
phone devices, or what Ms. Lofgren calls ``computational
devices,'' is profoundly important.
And with that, Madam Chair, I yield back.
Ms. Sanchez. The gentleman yields back.
At this time, I would like to recognize Zoe Lofgren, for 5
minutes.
Ms. Lofgren. Thank you, Madam Chair.
And I went and, over the break, I had my staff get a copy
of the innovation agenda that was rolled out by Speaker Pelosi,
Congresswoman Anna Eshoo and myself, in September of 2005,
actually. And on the front cover, there is a quote from John F.
Kennedy.
And it goes like this: ``The vows of this Nation can only
be fulfilled if we are first. And, therefore, we intend to be
first. Our leadership in science and in industry, our hopes for
peace and security, our obligations to ourselves, as well as
others, all require us to make this effort.''
And in the innovation agenda, we outlined, really, five
things that we needed to do. And number three was ``Affordable
Broadband Access for all Americans.'' That was right behind
``Basic Research'' and an ``Educated Workforce.''
And the reason why is that this is not just another good
and service. Broadband is an enabler of everything else. As we
said in the innovation agenda, the deployment of high-speed,
always-on broadband, Internet and mobile communications is
going to fuel the development of millions of new jobs in the
U.S.
And just as railroads and highways did in the past,
broadband and mobile communications are going to dramatically
increase productivity, efficiency of our economy. And so this
is an adopted policy of House Democrats. And it is our guiding
principle of how we are going to sort through issues in the
Nation's interest.
This isn't just something that is of interest to cities or
counties. This is a nationwide policy issue, which is why we
are here today.
Now, I just wanted to note--and then I will get into a
quick question--the telecommunications companies aren't paying
these taxes. I mean, they are here advocating, I think, because
they are concerned that, at some level, when you get too high,
usage will drop off. I am not saying they are a disinterested
party. But they are not paying these taxes. It is individuals.
And, actually, the reason why I got interested in this is
that, especially for low-income people, this is going to be the
way to the Internet superhighway. And if we prevent low-income
Americans from having that access to broadband, then our
ability to meet the innovation-agenda goals is going to be
impaired.
Now, it has been suggested that this is an unprecedented
step to take this. I don't think that is correct. We did do the
Internet-tax moratorium for exactly the same reason that this
bill has been introduced. It is the same issue, which is
broadband, and the enabler of innovation pursuant to our
innovation agenda.
But I am wondering, Mr. Mackey, do you have other examples
where Congress, because of a national policy issue, took a
similar type of action?
Mr. Mackey. Thank you. And I agree 100 percent with the
premise that you just laid out.
Yes, there have been other examples where Congress has
decided that there is a compelling national interest--back in
the 1970's, when the railroad industry was in a lot of trouble.
And what was going on is a lot of localities were sort of
disproportionately taxing the property of railroads because
they just had a sliver or ribbon of land that went through
their community.
Congress decided it was in the national interest to have a
national framework where local governments would be permitted
to tax railroad property, and tax railroads, but not in a way
that discriminates. So there is somewhat of a parallel to this.
There is also other instances, I think, with the airline
and Interstate Motor Carrier Regulation, where Congress has
stepped in and proscribed or prohibited local governments from
taxing those things.
But, clearly, you know, we don't ask you to take this step
lightly. And we have tried to work with localities, as I have
said earlier----
Ms. Lofgren. Right.
Mr. Mackey [continuing]. For the past decade. But it is our
feeling, for the reasons you stated, Representative Lofgren,
that there is a compelling national interest that, if we set up
a framework where States and local governments can tax
telecom--we can do so fairly, in a nondiscriminatory manner--we
are going to grow the jobs. We are going to, actually, we
think, create more tax revenue because of the applications that
are going to run and the jobs that are going to be created----
Ms. Lofgren. I am about to run out of time. And I do think
the rationale--for example, hotel taxes--I mean, we did high
hotel taxes when I was in local government, because it is
always easier to tax somebody else's constituents.
But, you know, actually, people don't really look at the
hotel tax. It is not the same kind of enabler of growth. It is
not a fundamental building block of a high-tech innovation,
educated society. It is not an enabler of other things in the
same way that this is.
I had other questions, but I have run out of time, Madam
Chairwoman. I don't want to abuse the process. So I yield back.
Ms. Sanchez. The gentlelady yields back.
Yes?
Mr. Cannon. Madam Chair, I would like to ask unanimous
consent to have included in the record the opening statement by
the Ranking Member of the full Committee, Mr. Lamar Smith.
Ms. Sanchez. Without objection, so ordered.
[The prepared statement of Mr. Smith follows:]
Prepared Statement of the Honorable Lamar Smith, a Representative in
Congress from the State of Texas, and Ranking Member, Committee on the
Judiciary
Madame Chair, I would like to thank you for bringing attention
during this Congress to a variety of discriminatory taxes.
This is the latest in a series of hearings that have covered the
Internet tax moratorium, the Mobile Workforce State Tax Simplification
Act, the Business Activity Tax Simplification Act, and the State Video
Tax Fairness Act.
I would also like to thank Ranking Member Cannon for his leadership
on this and so many other issues before the Commercial and
Administrative Law Subcommittee. He has been instrumental in getting
many bills passed during his tenure on the Committee and his insight,
knowledge, and commitment will be missed next year.
As for the ``Cell Tax Fairness Act of 2008'', through my
involvement with the Internet tax moratorium and other matters it has
become clear to me that telecommunications firms and consumers, and, in
particular, wireless services, are taxed higher at the state level than
many other businesses.
In our increasingly mobile economy, we should encourage the
deployment of cell phone and wireless devices and not inhibit them
through higher taxes. The fact that these devices travel through
interstate commerce and facilitate interstate commerce certainly gives
Congress the authority to constrain the states' taxing authority.
However, just because Congress has the authority to do something
does not mean that it should necessarily exercise that authority in
every case. I am well aware that the power to tax power has
traditionally been within the purview of the states. And given our
shaky economy, I can certainly sympathize with states' concerns about
losing revenue because of Congressional intervention.
So, I look forward to hearing from all our witnesses to see if
there is a way that we can weigh the disproportionate taxation of
telecommunications companies and consumers against the needs of states'
treasuries.
Ms. Sanchez. And I would also ask that the opening
statement from the Chairman of the full Committee, Mr. Conyers,
be entered into the record, as well----
Mr. Cannon. Thank you.
Ms. Sanchez [continuing]. And without objection, so
ordered.
[The prepared statement of Chairman Conyers follows:]
Prepared Statement of the Honorable John Conyers, Jr., a Representative
in Congress from the State of Michigan, Chairman, Committee on the
Judiciary, and Member, Subcommittee on Commercial and Administrative
Law
As Members of Congress, we must carefully balance competing
interests. We must ensure that the States do not burden interstate
commerce through their taxing authority, while also ensuring that the
authority of States to tax activity within their borders is maintained.
Today, we consider H.R. 5793, the ``Cell Tax Fairness Act of
2008,'' which seeks to impose a five-year moratorium on any new
discriminatory taxes and fees on mobile services, mobile service
providers, and mobile service property.
According to reports, taxes and fees account for about 15% of a
consumer's wireless services monthly bill. That burden seems higher
than the burden imposed on other services and products. That burden
could affect the free flow of commerce, stifle innovation, and be
considered a regressive impact.
However, we are in the midst of a dire economic environment, where
State and local revenues are declining fast, especially in my home
state of Michigan. According to estimates, state and local governments
rely on revenue from telecommunications for about $20 billion per year.
Thus, we need to look carefully at any legislation, including this one,
that could further impact State and local revenues and a state or local
government's ability to provide its residents essential services.
I look forward to today's hearing, and hope it will achieve three
critical objectives.
First, it should serve as a venue where we examine the taxes and
fees imposed on wireless services and providers.
Second, this hearing should allow us to focus on H.R. 5793, which
responds to concerns voiced by the wireless industry regarding what it
perceives as a discriminatory burden imposed on them by State and local
taxing authorities.
Third, this hearing should serve to begin a dialogue on State and
local taxation of communications. And I urge each state and locality to
revisit, simplify, and modernize its communications tax structure in
light of technological advances.
I thank Chairwoman Sanchez for holding this important hearing, and
I very much look forward to hearing today from the witnesses.
Mr. Cannon. And may I also apologize. We were laughing up
here. And that is sometimes a little coarse. I just wanted to
let people know that I was reading to staff the very kind
remarks that Mr. Smith had made about me, which were kind
enough to be laughed at.
Thank you, folks. We appreciate the seriousness of this
panel, and our guests here. And I want to make it clear that we
were laughing about something other than the subject matter
here. Thank you.
Ms. Sanchez. Okay; duly noted, for the record.
At this time, I would recognize the gentleman from Florida,
Mr. Keller, for 5 minutes of questions.
Mr. Keller. Thank you, Madam Chairwoman.
Senator Clayborne, let me start with you. How long have you
been in the Illinois State Senate?
Mr. Clayborne. About 13\1/2\ years.
Mr. Keller. Thirteen years--so you served with Senator
Obama?
Mr. Clayborne. That is correct.
Mr. Keller. As you can tell from our questioning, it is a
pretty bipartisan issue, at least, on the House side. Over on
the Senate side, Senator McCain has introduced the cell-phone
tax moratorium, S. 166, which he successfully got through the
Commerce Committee.
Have you had a chance to talk with your colleague, U.S.
Senator, Barack Obama, to see if you can persuade him along the
same lines as Senator McCain, on this issue?
Mr. Clayborne. No. No, I have not talked to Senator Obama
about this issue.
Mr. Keller. Do you have any sense of optimism that you can
win him over?
No?
Ms. Mahoney, do you know where he is on this? You got him?
Ms. Mahoney. I would say that you will not be able to
convince the senator on this issue.
Mr. Keller. All right. Okay--could have a vote present on
this one here.
Let me turn to you, Mr. Mackey.
Now, I have noticed that my home state of Florida has about
the third highest cell-phone taxes. And Virginia is sort of the
middle of the pack--I think, around number 36. Yet, Florida
sort of failed to pass their reform legislation to address this
issue, while Virginia was quite successful.
What do you attribute the two dynamics of that to?
Mr. Mackey. Well, I mean, I think Florida is--because you
don't have an income tax, it makes it that much more difficult
to try to replace the kind of money that is on the table.
I think, because Florida localities had, historically, been
granted a large amount of tax autonomy, there was a--they were
taxing at extraordinarily high rates. And so there was a lot of
money that needed to be replaced. And, politically, they
couldn't come up with--they got halfway to reform.
They made it so telecom companies don't have to file
hundreds or thousands of returns for local jurisdiction, and
they centralized. But, unfortunately--and this is the problem
we face everywhere--they were unable to get the rate down to
where there is not a significant disparity.
Mr. Keller. All right. Well, let me ask you: You seem to
think that these taxes have been a pretty good target for
localities to increase. Why do you think they are choosing to
increase the cell-phone taxes by a significant amount?
Mr. Mackey. Well, I think some of it is a historical relic
to the old days of regulation. I mean, the localities, because
telecom companies had to use their rights of way, they had the
ability to tax them and impose fees on them. And, then, when
wireless came along to compete, and wireless didn't have that
same situation, they had already had a well-established right,
if you will, to tax communications companies.
And their argument was, ``Reform equals `Let us make
wireless pay what we have historically made the wire-line guys
pay'.''
Mr. Keller. Now, Mr. Lay--and I am just paraphrasing--sort
of says, ``Well, look. If you are city councilman comes up with
some huge tax increase that you don't like on the cell phone,
you have a remedy. Just vote him out.'' Why is that not a
sufficient remedy under your view?
Mr. Mackey. Well, in my opinion--and some of it gets back
to what Mr. Cannon said. I think, a lot of times, you know,
people are busy. And, you know, these bills come in. And,
frequently, people don't focus on how much tax is being imposed
on the bill.
In some respects, you know, it is a hidden tax. It is on
the bill, but who is--people don't always go through their
bills. So I think one of the reasons is that it is a tax that
can be raised without people paying a lot of attention to it.
Mr. Keller. Ms. Mahoney, you are a local elected official.
Would you have concerns if--you know, as someone sitting for
election--if you had a big tax-increase vote on a cell-phone
issue?
Ms. Mahoney. I would be very concerned. And one of the
things that, you know, I have said, is that I think it is so
important if--I mean, if we are going to level the playing
field----
Mr. Keller. Right.
Ms. Mahoney [continuing]. You know, let us level it.
But, I mean, my fear is we start preempting these things,
you know, and pulling people out and separating them
individually--who is going to be before you next?
Mr. Keller. Right.
Ms. Mahoney. At the local level, for us to not have the
ability to say to our constituents--and we have to show them
how the money is going to be used--how we are going to use it.
And so if I come to them and say, ``Oh, we are just raising
it because we are going to give the employees a raise,'' that
is totally different than saying, ``I am not going to be able
to keep the fire department going. I am not going to be able
to, you know, keep our 911 system going. I am not going to be
able to do these things.''
That is totally different. But that is the constituents
that we speak to. And I think that is how you become elected--
when you address the individual needs of the consumer.
Mr. Keller. All right. Well, thank you.
I am sorry, Mr. Lay, I didn't get a chance to get to you.
But my time is expired. And I am sure my other colleagues will
follow up with that.
And I yield back to the balance of my time.
Ms. Sanchez. The gentleman yields back.
I really want to thank all of the witnesses for their
testimony today, and, again, for being so patient through the
interruption.
Without objection, Members will have 5 legislative days to
submit any additional written questions, which we will forward
to the witnesses and ask that you answer as promptly as you
can, so that we can make them a part of the record.
Without objection, the record will remain open for 5
legislative days, for the submission of any other additional
material.
Again, thanks to everybody for participating in this
hearing. And this hearing of the Subcommittee on Commercial and
Administrative Law is adjourned.
[Whereupon, at 3:30 p.m., the Subcommittee was adjourned.]
A P P E N D I X
----------
Material Submitted for the Hearing Record
Answers to Post-Hearing Questions from Gail W. Mahoney, Commissioner,
Jackson County, Michigan, Jackson, MI, on behalf of the National
Association of Counties
Answers to Post-Hearing Questions from the Honorable James Clayborne,
Illinois State Senator, Belleville, IL
Answers to Post-Hearing Questions from Scott Mackey, Esquire,
Kimbell Sherman Ellis, Montpelier, VT
Answers to Post-Hearing Questions from Tillman L. Lay, Esquire, Spiegel
& McDiarmid, LLP, Washington, DC, on behalf of the U.S. Conference of
Mayors, the National League of Cities, the Government Finance Officers
Association, the National Association of Telecommunications Officers
and Administrators