America's independent, non-partisan advocate for overburdened taxpayers.

 

Blog Contributors

Brandon Arnold
Vice President of Government Affairs 

Dan Barrett
Research and Outreach Manager 

Melodie Bowler
Government Affairs Intern 

Demian Brady
Director of Research 

Christina DiSomma
Communications Intern 

Jihun Han
Communications Intern 

Timothy Howland
Creative Content Manager 

Samantha Jordan
Communications Intern 

Curtis Kalin
Communications Intern 

Ross Kaminsky
Blog Contributor 

David Keating
Blog Contributor 

Douglas Kellogg
Communications Manager 

Sharon Koss
Government Affairs Intern 

Michael Liguori
Government Affairs Intern 

Richard Lipman
Director of Development 

Joe Michalowski
Government Affairs Intern 

Diana Oprinescu
Communications Intern 

Austin Peters
Communications Intern 

Kristina Rasmussen
Blog Contributor 

Telecommunications

Permanent Internet Tax Freedom Act Moves Ahead
Posted By: Michael Liguori - 06/20/14

Wednesday, the House Judiciary Committee passed the Permanent Internet Tax Freedom Act (PITFA), and there is plenty of reason for the American taxpayer to get excited. Congress has previously held a temporary moratorium on Internet access taxes. This bill sets that moratorium in stone, ensuring that burdensome state and local taxes don’t create a fiscal hurdle for engaging in the one of the fastest-growing, most productive parts of our economy and culture. Taxes on a resource like the Internet are not only a tax on free speech and communication, but a tax on an educational and economic resource that all Americans can access.

NTU Vice President of Government Affairs, Brandon Arnold recently wrote a letter to Congress in support of this admirable piece of legislation:

Any nation seeking to remain technologically and economically competitive should not punish the very citizens who are reaching out into the digital realm, especially by levying charges that are unlikely to have anything to do with bettering Internet service. Taxpayers need long-term protection from state and local authorities seeking to add taxes to the various routes consumers use to access the Internet, and this bill would provide such safeguards.

NTU urges lawmakers to bring PITFA to the House floor for a full vote immediately, as removing the uncertainty of Internet taxation would create a boon for both consumers and investors. However, it is important that other unrelated tax bills aren’t tacked on. One particularly concerning piece of legislation that has been lurking in the shadows is the Marketplace Fairness Act. This bill  would allow states governments to collect sales taxes from out-of-state businesses. This would increase costs for businesses, prices for consumers, and allow states to discriminate between one online business and another. In a commentary piece, NTU’s Nan Swift debunks some of the worst myths about this harmful piece of legislation.

National Taxpayers Union supports laws that encourage free enterprise and minimize unnecessary government burdens. PITFA is an excellent step toward this ideal, and we hope that legislators vote “yes” and a clean bill and avoid potential pitfalls, like the disastrous Marketplace Fairness Act.

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There’s No Good Reason for Congress to Impede Cable Merger
Posted By: Brandon Arnold - 05/09/14

Yesterday, the House Judiciary Committee’s Subcommittee on Regulatory Reform, Commercial, and Antitrust Law held a hearing on the proposed merger of Comcast and Time Warner Cable (TWC), during which Comcast Executive Vice President David Cohen was peppered with a number of tough questions from lawmakers. That should come as no surprise – this is a significant transaction that will affect tens of millions of consumers.

While lawmakers are right to carefully scrutinize the deal, they should resist the urge to more actively involve the federal government unless there is clear and specific reason to believe that laws are being broken or that the merger would result in excessive market consolidation. Neither appears to be the case here.

That’s why NTU joined a coalition of free market organizations to author a letter to Senators Chuck Grassley and Mike Lee – both key members of the Senate Judiciary Committee – to urge them to support the consolidation.

The letter makes a number of strong arguments about the importance of free markets and the vast potential benefits for consumers, but the key takeaway for policymakers should be that the merger will not limit consumer choices in any way.

As it states: “Because Comcast and TWC do not operate in the same markets (and therefore, consumers will face no loss whatsoever of competitive choice in television and video, broadband Internet, and telephone choices) there is no apparent substantive antitrust concern here. The transaction will simply swap one cable company for another in some markets – something which is competitively neutral on its face.” (emphasis mine)

Again, this is a $45 billion deal that will affect tens of millions of cable and Internet users, so it certainly makes sense for Congress to focus attention on it. But at the same time, lawmakers should avoid engaging in political grandstanding or, even worse, intervening in a transaction that will benefit consumers.

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House Restarts Debate over Satellite TV Bill
Posted By: Brandon Arnold - 03/10/14

On Wednesday, March 12, the House Energy & Commerce Committee’s Subcommittee on Communications and Technology will hold a hearing on the reauthorization of the Satellite Television Extension and Localism Act, or STELA as it is commonly known. First passed in 1992, this legal framework was originally intended to foster competition in the pay-TV marketplace.

The current law expires at the end of 2014 and this week’s hearing has the potential to launch Congress into a contentious battle over several complex issues. Lawmakers could, for instance, pursue aggressive regulatory reforms along the lines of the Next Generation Television Marketplace Act (H.R. 3720). Back in 2012 my former NTU colleague Andrew Moylan described how the legislation would “eliminate retransmission consent and compulsory license provisions, thereby placing negotiations between television content and service providers on a more level and clearly delineated playing field.”

However, rather than implementing a major regulatory overhaul, it appears Congress will probably take a less volatile route. According to the Committee’s draft legislation, which was released late last week, , the House will likely pass a relatively “clean” STELA reauthorization bill. The Committee’s draft recommends a few changes to current law, such as allowing cable and satellite companies to negotiate rates with individual broadcasters instead of being required to conduct joint negotiations. However, the proposal avoids more controversial issues, like ending the requirement that cable companies must include network broadcasts on their basic programming tier. Taking a safer route would make legislative passage easier, but it could very well mean that debate over additional market-driven,  consumer-oriented policies will have to wait until another opportunity arises. Given the current political environment, that may even mean the next Congress.

 

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Taxing Wireless to Pay for…West Virginia Tourism?!
Posted By: Lee Schalk - 01/16/14

File this one under bizarre tax legislation. Last week, West Virginia state Senator H. Truman Chafin introduced SB 259, which would hit wireless businesses with a $10 million tax hike to fund the West Virginia Division of Tourism.

According to the bill, the new revenue would be used “for the promotion and maintenance of outdoor activities including, but not limited to, skiing and white water rafting.”

While I enjoy carving up snowy mountains and navigating angry river rapids as much as the next guy, I fail to see why wireless companies should foot the bill for their promotion and maintenance. But maybe that’s just me.

Unfortunately, “hidden” cell phone tax legislation like SB 259 is all-too-common these days. In fact, the average nationwide tax burden on wireless service is a whopping 17.2 percent, including federal, state, and local taxes, according to a 2012 study by Scott Mackey of KSE Partners, LLP. To put things in perspective, the average tax rate on other goods and services is 7.4 percent. The study also found that, on average, wireless customers pay an extra $8.07 per month in taxes and fees as a result. That $8.07 is simply another regressive tax that hurts low-income earners in the midst of our stagnating economy and rising health care costs.

Instead of forcing wireless companies (and in turn, cell phone users) to cough up an extra $10 million for tourism, lawmakers in Charleston should focus on scaling back state spending, which soared in the Mountain State by 43 percent between 2000 and 2010.

To avoid higher wireless bills, West Virginia taxpayers should tell Senator Chafin and company that ski slopes, river rapids, and cell phones don’t mix.

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Latest Network Blackout Proves Congress Has Work To Do
Posted By: Brandon Arnold - 08/06/13

CBS and Time Warner Cable are embroiled in a fight over retransmission fees that has left millions of cable subscribers in major metropolitan areas like New York, Los Angeles, Chicago and Dallas without access to the popular network. While this may seem like a typical conflict between two large corporations, it is more complicated than one might think. Because the federal government has created a complex system of laws and regulations dictating the rules of the game, the playing field is strewn with obstacles that increase the likelihood that providers of content and service will end up in a stalemate. NTU has weighed in previously on the need for Congress to update and simplify communications laws. Conflicts like this current one likely won’t be made less onerous for the parties involved by overbearing government. Consumers would benefit from a more thoughtful policy approach that respects the private sector’s capacity to build prosperous markets for video content and service and minimizes the role of the federal government.

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Ac-“customed” to Waste?
Posted By: Pete Sepp - 08/05/13

All too many federal agencies can be cited for having budgetary skeletons in their closet, and U.S. Customs and Border Protection (CBP) is no exception. From poorly managing a drone fleet purchase, to making questionable demands for more employees, CBP has raised fears for the security of taxpayers’ wallets in the past. Yet, Congress has an opportunity to ease future fears, over a controversial new CBP project, before it can cause a fiscal fright.

Two years ago, the U.S. Department of Homeland Security (DHS) concluded a letter of intent with the United Arab Emirates to build a “pre-clearance” facility at Abu Dhabi airport which would allow travelers to the U.S. to clear customs before arriving on American soil. So far, so good: pre-clearance can not only save time and reduce congestion at U.S. points of entry, it can also help ease the way for tourists who contribute to economic activity while visiting here.

Now for the not-so-good:

  • According to Airlines for America statistics, Abu Dhabi airport accounted for less than 600 passenger arrivals per day to the U.S. in 2012, ranking it #80 on the list of top origin points to our country.
  • Right now, no U.S.-based carriers even fly from the Abu Dhabi International Airport back to here.  All other CBP pre-clearance zones in Canada, Ireland, and the Caribbean serve many airlines, including U.S.-flagged ones.
  • The primary beneficiary of the deal would be Etihad Airways, the state-owned airline of UAE. Thanks to this status Etihad enjoys an advantage over private airlines around the world that are subject to corporate profit taxes of their home countries. Which brings us to …
  • Another advantage conferred by the United States under the auspices of the Export-Import Bank (Ex-Im), whose risk-taking and subsidization have long been a concern for taxpayer advocates such as NTU. Etihad snagged $593 million in loan guarantees from Ex-Im last year for aircraft purchases, and could qualify for preferential financing that our own airlines (by definition) can’t get through Ex-Im.
  • Meanwhile, The Wall Street Journal is reporting that over the preceding year (before overblown sequester scare tactics), the wait times for getting through customs at stateside airports have “increased dramatically.”

All these drawbacks lead to one long question: Given CBP’s service challenges at existing airports, is it really a good idea to plow ahead with a facility whose use will be comparatively scarce in the near term, and give another leg-up to an airline backed by its own government as well as ours, at the expense of an already overtaxed flying public?

And “overtaxed” is an understatement. As NTU has often noted, the typical overall government tax and fee burden of 20 percent on a $300 domestic airfare is higher than the average effective rate a middle-class American is likely to pay on his or her 1040 income tax return. International air travelers can have it even worse, with impositions such as separate departure and arrival taxes along with a passenger agricultural inspection fee (which the Obama Administration ill-advisedly considered raising in 2009) and a customs fee.

Proponents of the CBP station at Abu Dhabi argue that the investment of U.S. tax dollars will be minimal since UAE will pick up 85 percent of the project’s expense under the current agreement. But that’s little comfort to tax-weary travelers in America (see above), who remain worried that whatever share they will be forced to commit could escalate if construction or operating costs are not contained. Meanwhile, there’s that pesky matter of how best to apply CBP’s fee collections as well as appropriations from general funds – should they be used to expedite higher-priority passenger and cargo entry-exit services?

Many Members of Congress seem to think so. In June, the House of Representatives passed an amended FY 2014 DHS Appropriations Bill specifically blocking the Abu Dhabi pre-clearance scheme. In May, a bi-partisan group of 11 Senators echoed the sentiment of their House colleagues in a separate letter to DHS Secretary Janet Napolitano, questioning whether the agency’s “decision was made as a result of a risk based analysis.”

Alas, earlier this month DHS announced it was moving forward with a data-sharing agreement that could pave the way for the facility’s activation, even as it faces a concerted petition effort from interested industry groups with considerable clout.

Regardless of the politics involved, the taxpayer aspects of the issue deserve further exploration – that goes not only for the Abu Dhabi pact but also the ever-troubling direction of the Ex-Im Bank. Allowing the free market and fiscal responsibility to sort out needs from niceties would provide some badly-needed bone-rattling for those accustomed to budgetary business as usual in Washington.

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Don’t Answer the Call for Higher Taxes
Posted By: Joe Michalowski - 07/10/13

As the economy continues to falter, Congress has an excellent opportunity to provide economic relief to families and businesses.  Recently, Sens. Ron Wyden (D-OR) and Pat Toomey (R-PA) reintroduced the Wireless Tax Fairness Act in the Senate. This occurred just weeks after Rep. Zoe Lofgren (D-CA) and Trent Franks (R-AZ) introduced the same bill in the House. This legislation, an earlier version of which was approved by the House in 2011, would ensure that taxes on wireless communications will not increase in any jurisdiction for at least five years.  As a recent study indicated, wireless services currently face a higher aggregate tax burden than nearly every other industry.  These high taxes stifle job growth in a sector of the economy with proven potential as an engine of prosperity.

Wireless taxes are inherently regressive, which should also concern policymakers. The Pew Internet & American Life Project found that young people as well as those with less financial means shoulder a disproportionate amount of the burden of taxes on telecommunications.  Some rely on their wireless device as their sole phone line and means of Internet access, making higher taxes even more disconcerting.  In an era when legislators continue to dial in more spending and higher taxes, lawmakers should hang up on all calls for higher taxes and instead pass the Wireless Tax Fairness Act.

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Will Congress Finally Treat Video Services Equally?
Posted By: Pete Sepp - 06/13/13

Telecommunications is once again in the policy spotlight for taxpayers, almost as quickly as the flip of the switch that would activate the spotlight’s shining beam. Earlier this week, the bipartisan Wireless Tax Fairness Act was introduced in the House. This bill, which NTU has long supported, would declare a five-year “time-out” on discriminatory state and local taxes for mobile phone services.

Yesterday, the House’s attention turned to subcommittee hearings of the Energy and Commerce Committee on whether to end, mend, or keep on defending the Satellite Television Extension and Localism Act, or STELA. Whenever government policy toward this technology is discussed, one major issue of concern to taxpayers and consumers is states’ tax treatment of satellite TV services. NTU has endorsed several iterations of the State Video Tax Fairness Act, which would prohibit inequitable tax policies based on the method through which video is delivered to a consumer (e.g., satellite vs. Internet-based).  As we pointed out in a 2011 letter to the House:

Telecommunications of all varieties have been targets for disproportionate and punitive taxes since the Spanish-American War, slowing much of the progress and productivity that could have emerged to enrich our society sooner. There is an obvious need to reduce telecommunication tax burdens on all providers, promote consumer choice, and provide a neutral playing field among similar products.

Yet, there are additional matters of equity that arise when deliberating STELA and other TV-related policies, primarily of the regulatory kind –  carriage requirements, “retransmission consent” between content and service providers, compulsory licensing, ownership restrictions, and proposals for “a la carte” programming mandates, to name a few. All of them raise weighty questions such as:

  • How and where has competition in the video services marketplace increased?
  • What is the proper balance of rights and bargaining capacity among parties negotiating deals over broadcasting?
  • Can government constructively facilitate this balance or are there better market-based mechanisms that treat everyone more fairly?

To NTU, the answers to all these questions begin with less, not more, red tape from Washington, particularly when it comes to the Federal Communications Commission (FCC). Far from acting as an impartial referee on a level playing field, the FCC has often behaved like an overbearing “amateur” by obstructing the game. (Witness, for example, the FCC’s ongoing attempts, which NTU strenuously opposes, to commit an end-run around Congress and establish “net neutrality” dictates for the online realm). Seasoned free-market observers like Larry Downes and Geoffrey Manne with Tech Liberation Front are calling for a major reassessment of the FCC’s role. Commenting late last year about the FCC’s tendency toward mission creep in evaluating mergers and crafting spectrum policy, Downes and Manne hit on a point that bears relevance to Washington’s entire regulatory stance toward telecom:

Increasingly, the agency is using that limited authority to restructure communications markets, beltway-style, elevating the appearance of increased competition over the substance of an increasingly dynamic, consumer-driven mobile market. Given the very different speeds at which Silicon Valley and Washington operate, the expanding scope of FCC intervention is increasingly doing more harm than good.

As far as video is concerned, the end result of this unnecessary federal roughness serves no one well – whether they’re broadcasters, cable companies, satellite firms, or, especially, their customers.  Participants at yesterday’s hearing, however, were somewhat more focused on immediate issues surrounding STELA’s future.  Their perspectives often clashed, but each tended to raise some kind of concern about the current regulatory regime.

Testimony on behalf of the National Association of Broadcasters largely supported STELA’s basic precepts and believed any alterations to the law should be “narrowly tailored,” but asked the Subcommittee to “remain vigilant” as the FCC implements an often-criticized incentive auction process for allocating spectrum. DIRECTV’s representative observed a “growing tension between innovation and stale broadcast regulation,” calling on Congress to either “jettison broadcast regulation altogether and create a truly free market” or “make the laws smarter to reflect the 21st century video marketplace.” Geoffrey Manne recommended another course to the panel: instead of reliance on STELA and other regulatory acts, “Government’s role should be [to] protect the copyrights of content owners and police market power through antitrust.”

In short, there are many views in the telecom sphere over where issues like retransmission consent should be headed. One attempt to simplify, rationalize, and minimize government’s role in such matters was the Next Generation Television Marketplace Act (NGTMA), which caught NTU’s eye in the last Congress. Other approaches worth considering (along with, potentially, a new version of NGTMA) are likely to be offered as the session moves forward.

NTU and its members eagerly await lawmakers’ responses to one of the most urgent tasks facing the future of our nation’s economic prosperity: limiting the burden and interference of government so as to allow the continued development of a robust, competitive telecommunications marketplace. The 21st century arrived more than 10 years ago; it’s time for federal policy to recognize that fact.

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Spectrum Conundrum
Posted By: Brandon Arnold - 05/03/13

Last year’s “Middle Class Tax Relief and Job Creation Act” extended a number of tax provisions, including payroll tax reductions, unemployment insurance, and Medicare payment rates.  Most of the legislation has since expired, but buried deep in the bill’s 102 pages was perhaps its most important provision – one that remains very relevant today.

Sections 6101 to 6103 of the law require the Federal Communications Commission (FCC) to auction off a large chunk of electromagnetic spectrum. This may sound like technical gobbledygook, but these auctions of federally-owned airwaves could foster economic growth and tremendously benefit both the deficit-plagued government by raising billions of dollars without hiking taxes, as well as telecommunications consumers by allowing for further deployment of advanced broadband networks.

Deficit reduction, job creation, telecommunications improvements – it sounds like a huge win for everyone. But these benefits could be undermined by the bureaucracy.  In April, the Department of Justice recommended that the FCC limit the auction to effectively bar the largest two telecommunications companies – Verizon and AT&T – from participating. This threatens both the optimal deployment of the spectrum as well as the financial benefits that the federal government could reap. 

In fact, a new paper from Georgetown University’s Center for Business and Public Policy says the cost of following DOJ’s approach could be $12 billion of federal revenues and over 118,000 jobs. And due to complicated auction rules, less of the spectrum would likely be available for advanced broadband technologies, meaning consumers would lose out, too. This is unacceptable.

The spectrum auction is important to economic growth and technological advancement. The FCC should not follow DOJ’s advice and rig the process to benefit some companies at the expense of taxpayers and consumers. 

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