California's New Tax on Texting
California's New Tax on Texting
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California brings to mind the Beatles’ famous song “Taxman.” The state already has the highest income-tax rate in the country on top of punishing sales and gas taxes. Now it wants to tax your text messages too.
The California Public Utilities Commission is proposing to broaden the “Public Purpose Program” surcharge it currently imposes on phone bills to include text messages. Under the 1996 Telecommunications Act, states may tax intrastate telecommunications to promote “universal service.”
California uses most of the surcharge proceeds to subsidize wireless services for lower-income residents. In other words, it’s another income transfer. Yet unlike taxes that require a two-thirds vote of the Legislature, the state utilities commission can unilaterally raise telecom surcharges.
Since 2011 the surcharge has more than tripled while the Public Purpose budget has increased by half. Yet according to the state utilities commission, revenues aren’t keeping pace with budget growth. Broadening the tax base is usually good policy if rates are lowered. But here the commission merely wants to squeeze more revenue from wireless customers who already pay the surcharge. The surcharge on telecom wireless and landline services—which last year was 6.68%—would be extended to the fees that companies charge for texting.
The texting tax would raise about $45 million a year, though the utilities commission claims it could bring in $220 million if applied retroactively for five years. Yes, you might be taxed on texts you sent in 2014. This is legally dubious, especially since the commission is basing its authority to impose the surcharge on the misconception that texting is a telecommunications service.
On Wednesday the Federal Communications Commission formally classified text messaging as an information service similar to Facebook Messenger, Skype and Slack. The FCC’s intention is to shield wireless carriers from lawsuits for blocking spam text messages. Yet liberal groups howl that the move will allow carriers to “censor” texts.
This is nonsense since carriers can only restrict bulk messaging. In any case, the FCC vote should pre-empt California’s texting tax. The 1998 Internet Tax Freedom Act prohibits federal, state and local governments from taxing the internet or imposing discriminatory web taxes such as on emails or tweets.
On the bright side, California’s tax on texting should give millennials a lesson in rapacious progressive government.
Appeared in the December 15, 2018, print edition.
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