It is hell being poor in America.
In other countries the poor have to pay for their own smartphones and wireless service.
But that’s not the case for the downtrodden from sea to shining sea.
What brings this up is the California Public Utilities Commission proposal to slap a tax on texting in order to provide free phones to those who meet low-income requirements.
The tax — up for a vote next month — is just part of the story.
If you have a smartphone and it wasn’t given to you for free along with a free calling plan then you already are paying taxes on your service specifically to subsidize free cell phones and free wireless service for the low income. And you’re getting dinged twice for it — once via the federal government and once via the state government.
California, of course, must have its own free program as well because Washington’s is never robust enough for Sacramento that is trying to out “Sweden” Sweden when it comes to government provided perks.
The federal universal service tax is 5.2662%. On a $50 a month wireless plan that’s costing you $2.60 a line. The there’s a 6.057% California tax that underwrites lifeline service and other state charges such as the 9-1-1 system that comes to a little over $3 on the same line. You are already being dinged 10 percent more a month on your service to underwrite free phones that — according to the Tax Foundation is part of the 19.16 percent in overall taxes on cellphone service.
Financially better off phone users subsidizing the poor is nothing new. For years landline phones have been slapped with a similar charge to extend subsidized service to the poor. It wasn’t free service but it was at a greatly reduced rate.
But what makes this one a tad different besides the poor not having to put up a single cent is the audacity of how the CPUC staff is justifying the proposal not to mention the fact given how voice and texting services are packaged it could be a stealth tax completely lacking transparency
The CPUC issued a statement saying, “From a consumer’s point of view, surcharges may be a wash, because if more surcharge revenue come from texting services, there would less be needed from voice services.”
George Orwell would be proud.
If it is indeed the case that the CPUC will simply by shifting the burden around among sources why isn’t there a proposal to reduce or eliminate the state lifeline charge at the same time on cell service? And if it’s a wash then how does that square with the CPUC justification for the tax in the first place that tax revenue on “voice” components of cellphone service is dropping and needs to be fattened.
The truth is, it is not a wash. But it is much better to lull the public into a general state of blissful apathy by making them think it is while you quietly add another tax that adds to and doesn’t shifts the tax burden.
When pushed into a corner rest assured the CPUC’s fallback argument will sound something like this: “Cell phones are an essential part of living today and the poor should not be denied them just like they should not be denied food and shelter. Besides, it’s not that much money.”
Funny how those “small” taxes or government income transfer schemes masquerading as fees are deemed inconsequential by every agency imposing them while acting like they are assessed in a vacuum. Add up all the taxes — sales, property, vehicle, gas, income, fees that are actually taxes, and all of the hidden taxes collapsed into the price of products that we buy among other taxes and pretty soon that couple of dollars is approaching $20,000 on an annual income of $60,000. You just don’t realize you’re paying the fees because the products you buy don’t have labels saying how much in taxes were paid to bring an item or market whether it’s was on obtaining the raw goods, transportation, manufacturing, and even inventory. Cell phone taxes are an example of where some of the add on taxes at the point of consumption are listed but because it comes from the phone company we assume it’s what Verizon, AT&T, Sprint and others are charging for their service.
So how has the phone companies fared versus the government when it comes to taking money out of your pocket since 2008?
According to the Tax Foundation, the average charge per cellphone line has gone down from $50 a month to $38.66. That’s a decrease of 23% in a decade. Meanwhile taxes charged on wireless service during the past 10 years have gone up 27 percent jumping from 15.9 percent to 19, percent of the monthly charge per line.
The argument, of course, is the price of phone service has gone down so the government has raised taxes so they can remain “income neutral.”
You’d think the CPUC, in proposing a new tax, would put some safeguards in place. One might be preventing someone that has a land-line subsidized phone or a free cell phone with free monthly service can’t have the other. There are a lot of folks that have dropped landlines because the simply can’t afford both. Why should someone getting free phone service be able to have both freebies on the dime of a phone user that either can’t afford both or simply opts not to have both?
Then there is the $11.3 billion question — the amount of money government agencies are now collecting on wireless services to underwrite freebies nationally. If there isn’t money to be made from free phones and free phone service then why are there so many companies that contract with individual street-side agents to keep signing up free phone customers? The answer is simple. Cell phone service is a fairly profitable business due to the relative lack of infrastructure.
Then there is the CPUC proposal itself that aims to tax texting. It seems as though the CPUC is still living in the days of crank phones. The bulk of the wireless service sold today combines voice and text often in unlimited packages. There’s no way to separate how much you are paying for voice versus text. No worries, for the CPUC. They can act all noble and say they will assess a flat fee instead of a percentage charge as they do on voice service to subsidize free phone service.
The CPUC also argues the texting fee is justified because the budget for public purposes such as free phone service has jumped by almost 50 percent since 2011 to $998 million.
Here’s a suggestion — why not cap the free phone service or, at the very least, make the eligibility levels a bit higher. In California, besides enrollment in everything from SNAP (food stamps) and Medi-Cal that may allow you to secure a free phone, if your household has one or two people and makes $26,400 or less a year you qualify.
Only one phone is allowed per household unless there are two families — which can also mean two roommates. There is an exception or two. If you’re a couple or a family that is homeless you can receive more than one free phone along with free monthly service.
And you were wondering how the homeless can afford smartphones. Take a look at your monthly wireless bill. You’re paying for the phones of that homeless guy hitting you up for money.
He probably thinks you haven’t given him enough.
This column is the opinion of executive editor, Dennis Wyatt, and does not necessarily represent the opinion of The Bulletin or Morris Newspaper Corp. of CA. He can be contacted at email@example.com or 209.249.3519.