In just a few weeks a tax you pay will increase – by 36%.
Part of some plan to fund health care? No. Another bailout? Wrong again.
Without a vote by Congress or a signature from the President, the unelected members of the Federal Communications Commission (FCC) have determined that despite recession, the highest unemployment in decades and rampant government spending, now is the time to hike a tax that almost every telephone user must pay.The FCC has raised the Universal Service Fund (USF) tax to 12.9%, up from 9.5%.
The federal USF tax, typically listed as an individual line item on phone bills, is levied to subsidize telecommunications services for low income households, schools, libraries, and consumers in rural or high cost areas. However, the federal universal service program is widely regarded as too large, too redistributive, largely unnecessary and with potential for serious problems due to lack of adequate oversight.
On top of the federal program, many states have their own universal service programs for low-income residents, and half have programs for local phone companies that provide service in “high-cost” (usually rural) areas. Many (not all) state programs are still funded by hidden charges on intrastate long distance and business revenue.
Both the federal and most state USF funds are in need of review, overhaul, and phase-out rather than expansion through higher fees.
In a rare bit of good news, many states are reforming and even phasing-out their state USF programs, and are implementing truth-in-billing for what were formerly hidden charges.
But not so at the federal level, where total federal universal service spending has increased from $1.8 billion in 1997 to nearly $8 billion today. Much of the increase is due to regulators’ efforts to transfer subsidies from “hidden” carrier charges to “explicit” fees and funds. But this is of little comfort if it brings no added accountability or limits. And the system is rigged to grow out of control.
Technology has rendered the whole system of universal service outdated. It’s a systems of price controls, subsidies, and transfer payments that discourages new entrants and reduces incentives to develop and deploy low-cost technologies. It is unfair to expect ordinary American consumers to pay more so that other, perhaps even wealthier consumers can pay less.
USF reform is needed now, before even more unnecessary stealth taxes are levied on American consumers.
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Today's TechByte was written by Bartlett D. Cleland, director of IPI Center for Technology Freedom.