Think back to what it was like having a cell phone as far back as 15 years or go, if you’re old enough.
Do you remember having extra charges added to your bill because you sent and received text messages? Each individual text might have tacked an extra five cents to what you owed for the month.
Cellular carriers no longer charge an extra fee for texting, and sending a text to someone is now more common as a form of communication than actually calling someone. Texting is convenient and doesn’t require an interruption to one’s day, as Forbes pointed out in 2017.
That all could change if the California legislature has its way. The state wants to place a tax on text messages. Their reasoning — to help support programs that make phone service accessible to the poor.
As if Californians weren’t already paying enough in excise taxes. The state put tax hikes on things like fuel, tobacco, and even a 33 percent tax on fruit purchased from a vending machine. That same fruit is tax-free if it’s purchased in a grocery store.
The California Public Utilities Commission issued a California Public Utilities report last month. The report said that the state’s Public Purpose Program budget has climbed from $670 million in 2011 to $998 million in 2017. Over that same period, telecommunications industry revenues that fund the program dropped from $16.5 billion to $11.3 billion.
The report said that collecting surcharges on text messaging revenue will help preserve and advance universal service by increasing the revenue base upon which Public Purpose Programs rely. Those programs include ones that help low-income residents afford phone service.
The Mercury News said that while state regulators have been “ginning up a scheme” to charge a fee for texting, opponents of the proposal, like the wireless industry and business groups, are working to defeat the proposal.
Jim Wunderman, president of the Bay Area Council, told the Mercury News that the proposal is a “dumb idea,” adding that texting is how conversations take place in this day and age, and putting a tax on texting would be the same as putting a tax on conversations.
How much each individual consumer would be required to pay under the new tax isn’t clear, but business groups, to include the Bay Area Council, the California Chamber of Commerce and the Silicon Valley Leadership Group, have calculated that new charges could amount to $44.5 million per year.
However, under this new proposal, California could put a tax on text messages already sent, going as far back as five years ago. Those charges could amount to more than $220 million for California consumers.
The wireless industry has argued that California doesn’t have the legal grounds to impose such a tax, according to the Mercury News. Wunderman told the publication that he is unaware of any local, state or federal programs that place taxes on text messages.
The CTIA, a trade association that represents the wireless industry in the US, said in legal filings that texting is an information service, like email, and not a telecommunications service. Therefore, texting isn’t subject to the authority of the California Public Utilities Commission.
The wireless industry has also argued that the surcharge would put wireless companies at a disadvantage with competing messaging services like Facebook Messenger, WhatsApp, Apple’s iMessage, and Skype. According to the CTIA, those services account for almost triple the volume of text messages sent through wireless carriers. Text messages sent through wireless carriers amounted to more than 3 trillion this year alone.
The proposal is scheduled for a vote next month. The state of California, in an attempt to provide phone service to low-income residents, is willing to go so far as putting a tax on communication. In the process, the state is willing to put the wireless industry at risk, potentially making them less competitive against other messaging services. This is another example of government overstepping its own authority to squeeze revenue from the private sector to fund its own programs.
Mike Ursery
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