It is not often that I agree with a Republican. This article in today’s Washington Post though had me agreeing with Virginia Republican Delegate Samuel Nixon. His bill before the Virginia Legislature, which is now in session, would replace a number of ad hoc communication taxes with a flat 5% state tax on phone bills, cable bills and various other forms of electronic communication services.
As long time readers know, I do not object to paying taxes. I believe taxes are the cost of civilization. I believe that in many cases we need to pay more taxes. We clearly have been stinting necessary services like road maintenance. I do though think that tax rates should be fair. I am completely supportive of graduated income tax rates. Lord knows I have paid plenty of income taxes, given my comfortable financial situation. I am less enamored with sales taxes, which hit both rich and poor equally, but I think they have their place. What I really object to though are over the top, usury taxes. My telephone bill is Exhibit Number One. It seems like every year the bills expand with newer and higher taxes, while the value I get from the service remains constant.
My telephone bill last month was $35.77. That is clearly not a whole lot of money. It would be a lot less though if it were not for the extra taxes and surcharges. My actual bill is $24.81. It includes a $1.88 for a non-listed number. The rest ($10.96) include a variety of taxes, almost all of which are state and local.
As a percent of the total phone bill, I am paying a tax rate of 31%. As a percent of the total of services billed, the tax rate is 44%. I cannot think of any other form of tax that is so usury. Interest rates this high are rightfully outlawed. Why do we tolerate tax rates this high that also sock it to even our most income challenged citizens?
Where does this $10.96 in taxes go? $3.00 of it helps pay for a 911 center. $5.77 goes to my county’s general coffers. 77 cents goes for federal taxes.
Of course, I pay other communications taxes. The taxes on my cable and internet bill are more modest. Cox Communications is our ISP and cable provider. Our bill is $85.65 a month, of which $3.47 are local taxes. This is about a 4% tax rate. We also have cell phones. Since we are cheap and tend to use email instead of cell phones, my wife and I carry Virgin Atlantic prepaid mobile phones. Even when prepaying for minutes though there are taxes. We pay $1 in taxes for every $20 in minutes, or a tax rate 5%. We also have a long distance provider. Again, we hardly ever call anyone long distance. I was sick of plans that required a minimal monthly payment. Therefore, I found Pioneer Telephone, which has a plan where I pay only 2.7 cents a minute with no minimum monthly payment required. For many months, my minutes were tax-free. Although my bill last month was only 93 cents last month (29 minutes), 15 cents were tacked on for various taxes. The effective tax rate is 16%.
How did this sad state of taxation evolve? Apparently, over the years it was easier to nickel and time telephone customers than to make other choices, like raise general sales or income taxes, or cut spending elsewhere. Most of this money goes to local governments, which are often constrained by the state on charging other forms of taxes.
I certainly do not want to stop funding 911 centers or the salaries of operators that help the hearing impaired. That too is part of the cost of civilization. I just think these taxes should come from general revenues. While these taxes might amount to a couple hundred dollars a year for me, that may be a lot of money to someone on a fixed income. An impoverished woman who is living month to month on social security may be splitting pills in order to pay these taxes.
Therefore, this bill is a sensible step in the right direction. If all my communication services were taxed at a flat rate of 5% then clearly my telephone bill would take a nose dive. On the other hand, taxes for my cable and internet services would go up. At least the taxes would be reasonable. I would happier if these services were just considered part of the cost of state and local government. I believe is better to marginally change income and sales tax rates than to slap such exorbitant fees on services that cost relatively little, but which we all need.