The Facts
* Wireless telephone customers pay an average tax rate of 17.97%; the sales tax for other goods and services is 8.25% at most.
* The current Texas Universal Service Fund is 4.3% of taxable communications receipts, which altogether adds approximately 2.7% onto wireless services.
* Upon deregulation, interstate long distance rates fell 68% from 1984 to 2003, while intrastate rates fell 56%. The slower decline of intrastate rates is due largely to state regulators who have kept intrastate access charges artificially high in order to maintain subsidies of local phone rates.
* The dual system in Texas of deregulated urban markets and regulated rural markets could create a “digital divide” between urban and rural customers.
Recommendations
* Eliminate the “tax on a tax” aspect of the state and local sales taxes.
* Municipal Franchise Fees. Restructure these fees to reflect the marginal costs of providing services through the right-of-way.
* Universal Service. Do not expand Universal Service Fund subsidies or fees to new services or technologies, e.g., broadband, VoIP. Examine ways to further reduce the Universal Service Fund.