The bill is sponsored by Reps. Zoe Lofgren (D-Calif.) and Trent Franks (R-Ariz.), and would force state and local governments to take a five-year break from hiking taxes on wireless companies. Report language from the House Judiciary Committee argues that state and local taxes on wireless companies rose four times faster than taxes on other goods and services between 2003 and 2007.
The bill also gives a nod to the so-called "Laffer curve" by noting that higher tax rates are likely decreasing government revenues, because the taxes are having the effect of dampening demand for wireless service.
"The irony of state and local governments’ imposition of high taxes on wireless services is that decreasing taxes on wireless service may actually generate more revenue by broadening the wireless tax base and flattening the rate to bring it more in line with sales taxes on other goods and services," the report said. "One study concluded that state and local governments lose $15 billion per year because of hikes in tax rates."
The report adds that while taxes on phone companies should have dropped after the breakup of the AT&T monopoly decades ago, they never did fall, and instead were transferred to new wireless companies.
The report has one notable dissenter — House Judiciary Committee ranking member John Conyers (D-Mich.), who said the bill goes too far in limiting states' rights. But even Conyers agreed that "increased taxes and fees on wireless services hurt consumers."
Rep. Judy Chu (D-Calif.) also dissented:
"The bill will undermine the ability of states to pay for essential services, such as public health and safety, education, and maintenance of state highways and will be especially harmful during this difficult economic time as it impacts the flexibility of states to respond to the economic downturn," Chu said. "The legislation is based on faulty information and will benefit the wireless services industry."
The bill is up Tuesday and will need a two-thirds majority to pass, which should be expected given broad support from Democrats and the 236 co-sponsors the bill enjoys.