Texas Ranks 10th in Telecom Taxes

Critics call for more scrutiny of state telecom taxes such as Universal Service Fund

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    NEWSLETTERS

    Texans pay some of the highest cellphone taxes in the nation, according to a recent study.

    According to a study by a leading telecom tax specialist, Texans pay some of the highest cellphone taxes in the nation.

    Texas ranks 10th in the United States, according to the study by Scott Mackey at KSE Partners. The study shows that 17.48 percent of a Texan's average cellphone bill goes to government fees.

    "I think using cellphone bills as a way to collect taxes is just an easy way for the government to collect taxes. People don't really notice it," said Bill Peacock, director of the Austin-based Texas Public Policy Foundation.

    The average Texas consumer annually pays about $318 in taxes for a bundled telecom package, according to the foundation. Cellphone users pay more than $100 per year in taxes.

    Peacock, who has studied Texas' telecom tax structure for years, said sales tax is partially to blame.

    "We have such a high sales tax in the state, and that drives up all the other taxes that we have," he said.

    But Peacock said many of the taxes are obsolete and fund programs that don't need to be around anymore.

    "Cellphone users are subsidizing a lot of different people and a lot of different uses that really have nothing to do with cellphone service," he said.

    The Texas Universal Fund, for example, maintains rural landlines in Texas. He said the millions going into the fund should be examined because most Texans have cellphones.

    "There was a new tax passed here in Texas that impacted taxes we pay on our cellphone bills a few years ago," he said. "They actually put in the law that you couldn't list the tax a certain way so the people wouldn't think they were getting more taxes when, in fact, they were."

    Peacock said the bills are confusing for customers.

    "It's overwhelming," Garland resident Marcia Cox said.

    She has a bundled telecom package with AT&T Co. Her bill lists a dizzying number of fees: a 911 Service Fee, a Universal Service charge, a Texas State telecom Tax, a City District telecom Tax, a City Telecom Tax, a Regulatory Cost Recovery charge, a State Recovery Fee and a Texas Universal service charge.

    Her bill is $373.50 per month, $46.98 of which goes to taxes and fees.

    "If you really get down to looking at it you, just go, 'What in the world is all of this?" Cox said.

    Her basic cell service monthly runs $52.95. She pays a Federal Universal Service Charge of $1.70 that goes in a national fund to subsidize rural landlines, schools and libraries. She is charged 66 cents as a Regulatory Cost Recovery charge that reimburses phone companies to comply with government regulations. A State Recovery fee, also known as the State Franchise Tax, is 31 cents. The tax reimburses telecom companies for taxes they pay to operate in Texas. And a 99-cent Texas Universal service fee goes to maintain landlines in rural Texas.

    In recent years, Texas legislators have eased the telecom burden by repealing one telecom tax and lowering another.

    But other fees continue, such as the 50-cent wireless 911 emergency service fee Cox pays for the cell emergency network and state and local taxes on her phone.

    People who want to see changes in the tax structure should call their legislators.

    Lawmakers in Washington have been pushing a bill that would halt telecom taxes for five years but it has yet to pass.

    "I think we're probably being overtaxed when I actually sit down and look at everything," Cox said.

    According to state records, Texas' universal service fund collected more than $462 million. Most of it goes to maintain rural landlines across the state.