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CELL TAX FAIRNESS ACT OF 2008 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

COMMERCIAL AND ADMINISTRATIVE LAW 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

ON

H.R. 5793 

SEPTEMBER 18, 2008 

Serial No. 110–209 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

JOHN CONYERS, JR., Michigan, Chairman 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

LINDA T. SA ́ NCHEZ, California 

STEVE COHEN, Tennessee 

HANK JOHNSON, Georgia 

BETTY SUTTON, Ohio 

LUIS V. GUTIERREZ, Illinois 

BRAD SHERMAN, California 

TAMMY BALDWIN, Wisconsin 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

ARTUR DAVIS, Alabama 

DEBBIE WASSERMAN SCHULTZ, Florida 

KEITH ELLISON, Minnesota 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

DANIEL E. LUNGREN, California 

CHRIS CANNON, Utah 

RIC KELLER, Florida 

DARRELL ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TOM FEENEY, Florida 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

PERRY APELBAUM, Staff Director and Chief Counsel 

SEAN MCLAUGHLIN, Minority Chief of Staff and General Counsel 

SUBCOMMITTEE ON COMMERCIAL AND ADMINISTRATIVE LAW

LINDA T. SA ́ NCHEZ, California, Chairwoman 

JOHN CONYERS, JR., Michigan 

HANK JOHNSON, Georgia 

ZOE LOFGREN, California 

WILLIAM D. DELAHUNT, Massachusetts 

MELVIN L. WATT, North Carolina 

STEVE COHEN, Tennessee 

CHRIS CANNON, Utah 

JIM JORDAN, Ohio 

RIC KELLER, Florida 

TOM FEENEY, Florida 

TRENT FRANKS, Arizona 

MICHONE JOHNSON, Chief Counsel 

DANIEL FLORES, Minority Counsel 

(III) 

C O N T E N T S 

SEPTEMBER 18, 2008 

Page 

THE BILL 

H.R. 5793, the ‘‘Cell Tax Fairness Act of 2008’’ .................................................... 3 

OPENING STATEMENTS 

The Honorable Linda T. Sa ́nchez, a Representative in Congress from the 

State of California, and Chairwoman, Subcommittee on Commercial and 

Administrative Law ............................................................................................. 1 

The Honorable Chris Cannon, a Representative in Congress from the State 

of Utah, and Ranking Member, Subcommittee on Commercial and Administrative Law ........................................................................................................... 10 

The Honorable Zoe Lofgren, a Representative in Congress from the State 

of California, and Member, Subcommittee on Commercial and Administrative Law ................................................................................................................ 11 

WITNESSES 

Ms. Gail W. Mahoney, Commissioner, Jackson County, Michigan, Jackson, 

MI, on behalf of the National Association of Counties 

Oral Testimony ..................................................................................................... 19 

Prepared Statement ............................................................................................. 22 

The Honorable James F. Clayborne, Jr., Illinois State Senator, Belleville, 

IL 

Oral Testimony ..................................................................................................... 25 

Prepared Statement ............................................................................................. 27 

Scott R. Mackey, Esquire, Kimbell Sherman Ellis, Montpelier, VT 

Oral Testimony ..................................................................................................... 31 

Prepared Statement ............................................................................................. 33 

Tillman L. Lay, Esquire, Spiegel & McDiarmid, LLP, Washington, DC, on 

behalf of the U.S. Conference of Mayors, the National League of Cities, 

the Government Finance Officers Association, the National Association of 

Telecommunications Officers and Administrators 

Oral Testimony ..................................................................................................... 41 

Prepared Statement ............................................................................................. 43 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Letters of Support from the National Black Chamber of Commerce, the 

Chamber of Commerce of the United States of America, and the National 

Association of Neighborhoods (NAN) .................................................................. 13 

Prepared Statement of the Honorable Lamar Smith, a Representative in 

Congress from the State of Texas, and Ranking Member, Committee on 

the Judiciary ......................................................................................................... 59 

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, Chairman, Committee on the 

Judiciary, and Member, Subcommittee on Commercial and Administrative 

Law ........................................................................................................................ 60 

Page

IV 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Answers to Post-Hearing Questions from Gail W. Mahoney, Commissioner, 

Jackson County, Michigan, Jackson, MI, on behalf of the National Association of Counties .................................................................................................... 64 

Answers to Post-Hearing Questions from the Honorable James Clayborne, 

Illinois State Senator, Belleville, IL ................................................................... 66 

Answers to Post-Hearing Questions from Scott Mackey, Esquire, Kimbell 

Sherman Ellis, Montpelier, VT ........................................................................... 67 

Answers to Post-Hearing Questions from Tillman L. Lay, Esquire, Spiegel 

& McDiarmid, LLP, Washington, DC, on behalf of the U.S. Conference 

of Mayors, the National League of Cities, the Government Finance Officers 

Association, the National Association of Telecommunications Officers and 

Administrators ..................................................................................................... 72 

(1) 

CELL TAX FAIRNESS ACT OF 2008 

THURSDAY, SEPTEMBER 18, 2008 

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON COMMERCIAL

AND ADMINISTRATIVE LAW, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 1:08 p.m., in room 

2141, Rayburn House Office Building, the Honorable Linda 

Sa ́nchez (Chairwoman of the Subcommittee) presiding. 

Present: Representatives Sa ́nchez, Lofgren, Watt, Cannon, Jordan, and Keller. 

Staff present: Michone Johnson, Majority Chief Counsel; 

Norberto Salinas, Majority Counsel; Adam Russell, Professional 

Staff Member; and Stewart Jeffries, Minority Counsel. 

Ms. SA ́ NCHEZ. The Subcommittee on Commercial and Administrative Law will now come to order. Without objection, the Chair 

will be authorized to declare a recess of the hearing. And I will now 

recognize myself for a short statement. 

In a world where text messaging, Internet capability, digital 

music and instant voice communication at the push of a button are 

commonplace, wireless services are becoming more prevalent than 

ever. In fact, over the last decade, the number of cell-phone subscribers has quadrupled to over 250 million. 

Not only have wireless phones become required for many businesses, but they have also become ingrained in daily life. Cellular 

phones provide a platform for friends to instantaneously chat, for 

businesses to pitch proposals, and for those who are in distress due 

to natural disasters, to make emergency contact. Couple these benefits with cell phones’ ease of use and competitive pricing, and it 

is no wonder that the public has quickly come to rely on them. 

But as the popularity of cell phones has grown, the wireless industry maintains that local and State tax rates on wireless services 

have steadily increased. The wireless industry has raised pointed 

concerns that local and State governments have disproportionately 

raised these tax rates and fees, when compared to other services 

and goods. 

State and local governments generally dispute those charges. 

They suggest that they are simply restructuring their tax bases, in 

light of the trend away from landline communication. Further, they 

contend that the tax burden should not necessarily be applied 

evenly across different industries. 

2 

Many types of industries are subject to their own special taxes, 

including not only tobacco and alcohol, but also travel, hotels, entertainment, transportation and public utilities. 

Today’s legislative hearing will provide us with the opportunity 

to hear testimony on the taxes and fees imposed on wireless services and providers. The testimony will also assist us in determining 

whether the tax-and-fee burden is truly unfair, and not justifiable. 

Additionally, we will examine H.R. 5793, the ‘‘Cell Tax Fairness 

Act of 2008,’’ which seeks to impose a 5-year moratorium on new, 

discriminatorily imposed taxes and fees on wireless services and 

providers. 

As we hear today’s testimony, we must remember to balance the 

competing interests concerning the issues addressed by this legislation. As consumers, we want to pay lower taxes and fees on our 

wireless services, but as legislators, we understand that State and 

local governments need revenue to provide the services we need 

and expect from them. Accordingly, I am very much looking forward to hearing today’s testimony. 

[The bill, H.R. 5793, follows:] 

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HR5793-2.eps
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HR5793-3.eps
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HR5793-4.eps
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HR5793-5.eps
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HR5793-6.eps
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HR5793-7.eps
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Ms. SA ́ NCHEZ. At this time, I will now recognize my colleague, 

Mr. Cannon, the Ranking Member of this Subcommittee, and the 

lead Republican co-sponsor of the legislation, for his opening remarks. 

Mr. CANNON. Thank you, Madam Chair. It is a pleasure to be 

here today. 

And I would like to thank the witnesses for joining us at this 

hearing. 

The Chair may recall that, at the markup of the State Video Tax 

Fairness Act in July, I requested that we hold one final hearing on 

H.R. 5793, the ‘‘Cell Tax Fairness Act of 2008,’’ which was introduced by the gentlelady from California, Ms. Lofgren, who is with 

us, here, today. 

At the time that I asked for the hearing, the bill had 75 co-sponsors, including 12 Members of the Judiciary Committee. Today, 

there are 130 co-sponsors, including 15 Members of the Judiciary 

Committee. And, hopefully, when this bill comes up for markup in 

the 111th Congress, we will have a majority of the House as cosponsors. 

As you know, I am one of the 130 co-sponsors, and I support this 

legislation because it is my belief that States and localities unfairly 

burden phone consumers with excess taxes. In my home, for instance, when my home phone rings, nobody answers it, because all 

my kids know that if the call was for them, it would be on their 

cell phone. And I know the same darn thing. 

So I occasionally answer the phone. And what do I end up doing? 

Talking to people that want to talk to my wife, who hasn’t quite— 

well, actually, she does know how to text—but she is not quite at 

the same level as the rest of the family, technologically. She does 

have a cell phone. 

In fact, maybe what I ought to do is start answering by saying, 

‘‘Yes, my wife’s cell-phone number is—do you have a pen? Would 

you like me to text it to you?’’ Because, other than that—I mean, 

if I call home, it—it can ring 30 times before we get the—in fact, 

we took off the answering machine because nobody would ever listen to the messages. 

So the world has changed. And nationwide, the average tax rate 

on wireless services is now 14.14 percent, which is more than double the average sales-tax rate for all businesses, which is about 

7.04 percent. These tax rates are more in keeping with what we 

call ‘‘sin taxes,’’ that is, taxes on alcohol and tobacco, than with a 

general business taxes. 

And, you know, ‘‘sin taxes,’’ we sometimes say, ‘‘are taxes on the 

stupid.’’ But this is just a plain tax on poor people—let us say the 

most regressive tax—among the most regressive taxes that we 

could possibly have, and suggests to the mind that when we have 

the Federal telephone tax of 3 percent to fund the Spanish-American War, which never went away. And, at that time, it was, ‘‘Let 

us tax those rich people who have telephones.’’ 

It is not rich people anymore. Everybody has telephones. And 

what we really hope is that we empower people who don’t have as 

much money today, in the—because we want them to have more 

money with new ideas and new technology, and a robust economy 

tomorrow, as opposed to saying, ‘‘We are just going to tax everyVerDate Aug 31 2005 12:26 Feb 10, 2009 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6601 H:\WORK\COMM\091808\44495.000 HJUD1 PsN: 44495
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body and take money from them.’’ This is not like a ‘‘sin tax’’ in 

that most profound sense. 

It is my understanding that these taxes on the wireless industry 

are estimated to be nearly $5 billion a year. That is an astounding 

number, and something that warrants the attention of the Subcommittee. 

In my time on the Subcommittee, I have seen many hearings— 

and, in fact, I have Chaired many hearings—on the subject of discriminatory State taxes. I know that discrimination, at least in this 

context, is often in the eye of the beholder. However, to my mind, 

imposing taxes on the wireless providers that are more than double 

to the general business taxes are, by definition, discriminatory. 

In that regard, I am actually relieved to see that one of our witnesses here today, County Commissioner Mahoney, acknowledges 

that State and local taxation schemes have not kept pace with 

changing technology. It is refreshing that we can have at least a 

point of agreement in some cases. And similarly, it is refreshing 

that State Senator Clayborne has taken the position that a State’s 

revenue is not sacrosanct, and that it is possible to tax a class of 

business too much. 

I know that many States are hurting financially. We just read 

today my State’s calling a special session to deal with a $200 million budget shortfall. And I respect those concerns, and the fact 

that this bill is going to further reduce tax revenues. However, I 

think this legislation has many features that will ensure that it 

does not diminish the State’s revenues; rather, it will merely require that States tax business uniformly, going forward. I think 

that it is worthwhile—a worthwhile purpose that—one that will 

benefit consumers in the long run. 

And, again, I would like to thank the Chair for exceeding to my 

request for a hearing on this issue, and yield back what time remains. 

Ms. SA ́ NCHEZ. The gentleman yields back. And I thank him for 

his statement. 

I would now like to recognize my colleague, Ms. Zoe Lofgren, the 

distinguished Chairwoman of the Immigration Subcommittee, for 

her opening remarks on H.R. 5793, which she introduced. 

Ms. LOFGREN. Thank you, Chairwoman Sa ́nchez. And, just as 

Mr. Cannon has requested this hearing, I also requested that you 

have this hearing. And I am very appreciative that you have carved 

out time to do this. I know that the schedule is unbelievably tough. 

And I really wanted to thank you and credit you for taking the 

time to do this. 

I decided to introduce the Cell Tax Fairness Act because I see 

that wireless services and mobile devices are going to play an essential and, actually, a growing role in affordable broadband access 

in this country. And the FCC has estimated that in 2007, last year, 

68 percent of all broadband subscriptions were wireless subscriptions, which is an astonishing percentage. 

And given that the United States is slipping in broadband penetration—the last I looked, we were 16th in broadband penetration—it is important that we visit this issue. 

12 

The access to broadband is going to be accelerated with the spectrum—the 700-megahertz auction. And so it is timely to take a look 

at what impediments we have put into place for broadband access. 

I think it is important to note that the tax burden is particularly 

significant for those who use wireless phones. Thirty-nine million 

Americans have—wireless subscribers—have incomes of less than 

$25,000 a year. And so if you take a look at the need to penetrate 

broadband broadly through America, the growing opportunity that 

the spectrum sale is going to give us, and the fact that we are slipping, and still way behind, especially among low-income Americans—this discriminatory tax system that we have identified here, 

on cell phones—we shouldn’t even call them cell phones, because 

they are data devices now—is very important. 

Some have suggested that this is really a bill for the telecommunications industry. And, as a matter of fact, I have been on 

the opposite side of so many issues when it comes to that industry, 

from net neutrality to spectrum policy, open access and the like— 

this isn’t about the cell-phone industry. It is about the American 

people, who need to have access to broadband. And taxes do have 

an impact, and impact behavior. 

Now, I want to say just a word about local government, because 

this is the last year I can say this. I served longer on the Board 

of Supervisors of Santa Clara County than I have yet to serve in 

the United States House of Representatives. And I do know that 

the times are tough in local government. And revenue is necessary 

for the essential services that counties and cities do. 

I am very sensitive to that. And I also know that local governments are, you know, at the bottom of the feeding chain, really, 

when it comes to local-government services. It all rolls to you. And 

it is very tough to meet the obligations that are so important. 

I know that it is almost impossible to avoid taxing something 

that you can tax, when you are facing the needs that you have, 

which is why a Federal law is something we need to take a look 

at. 

Now, it is important to note that this bill, if enacted into law, 

would not prevent—it wouldn’t take any taxes away that are currently in place. And it wouldn’t prevent additional taxation, provided that it was the same rate as other goods and services. Because, if a local government needs to have a half-cent sales tax, 

then it should apply broadly to whatever is taxable in the State. 

In California, you don’t tax food. Other States do. 

But for discriminatory taxes, there would be a time out, a break. 

And I think that, as States and local governments struggle with 

telecommunications-taxation policy, and we have tried to do that 

with the Internet-tax moratorium and the like, this time-out is 

highly necessary. Because if we don’t do a time-out, at the rate of 

taxation increase on cell taxes, we are going to have a huge—an 

even bigger problem than we have today. 

So I want to thank, again the Chairwoman. 

I want to thank Mr. Cannon and his staff for all their hard work 

in making sure that the 130 co-sponsors are bipartisan. This is not 

a partisan issue. 

And I would ask unanimous consent to place in the record, letters of support from the U.S. Chamber of Commerce, the National 

13 

Association of Neighborhoods and the Black Chamber of Commerce, who have all asked that we support this bill. 

Ms. SA ́ NCHEZ. Without objection, so ordered. 

[The information referred to follows:] 

LETTERS OF SUPPORT FROM THE NATIONAL BLACK CHAMBER OF COMMERCE, THE

CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA, AND THE NATIONAL

ASSOCIATION OF NEIGHBORHOODS (NAN) 


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3-2.eps
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Ms. LOFGREN. And with that, I will yield back, Madam Chairwoman—again, thanks for this hearing. 

Ms. SA ́ NCHEZ. I thank the gentlelady for her statement. 

Without objection, other Members’ opening statements will be included in the record. 

I am now pleased to introduce the witnesses on our panel for today’s hearing. Our first witness is Gail Mahoney. Commissioner 

Mahoney serves as the county commissioner for Jackson County, 

MI. She is also the deputy director for South Central Michigan 

Works. 

Commissioner Mahoney has served as both chair and vice chair 

of the Human Services Committee, and as chair of the Personnel 

and Finance Committee. Commissioner Mahoney is currently a 

member of that committee. 

Commissioner Mahoney has also been a member of the National 

Association of Counties, Finance, and Intergovernmental Steering 

Committee, since 1996. She serves on numerous boards and commissions, including the Jackson County Fair Board, the Armory 

Arts Alliance, Mid-South Substance Abuse Commission, which she 

chairs, Region Two Planning Commission, Passages Center for 

Women’s Health of Foote Hospital, and the National Association of 

Black County Officials. 

Welcome, Ms. Mahoney, to our panel. 

Our second witness is James—is it Clayburn or Clyborne? 

Mr. CLAYBORNE. Clayborne. 

Ms. SA ́ NCHEZ. Clayborne. State Senator Clayborne represents the 

57th district of Illinois. Elected in 1995, he sits on several committees, including the Senate Committee on the Whole, Executive Appointments, Insurance and Pensions and Investments Committees. 

State Senator Clayborne chairs the Environment and Energy Committee, as well. 

Prior to his election to the State senate, Senator Clayborne was 

a partner at Hinshaw & Culbertson in Belleville, Illinois, and 

served as a St. Clair County assistant State’s attorney. 

Welcome to you. 

Our third witness is Scott Makay—or, I am sorry—Mackey. Pardon me. I just made you Irish. [Laughter.] 

Mr. Mackey is a partner at Kimbell Sherman Ellis, KSE, and assists clients in designing and implementing successful strategies in 

State capitals. Mr. Mackey joined KSE in 2000, and became a partner in 2005. 

Prior to joining KSE, Mr. Mackey was the National Conference 

of State Legislature’s chief economist. There, he spent 10 years 

working with legislative leaders on critical State issues like the 

taxation of electronic commerce and telecommunications-tax reform. Prior to joining NCSL, Mr. Mackey was legislative assistant 

to U.S. Senator James Jeffords, where he handled environmental 

issues and dairy policy. 

Our final witness is Tillman Lay. Mr. Lay is a partner in the 

Washington, D.C. law firm of Spiegel & McDiarmid—did I pronounce that correctly? 

He has substantial experience in litigation and counseling on 

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law matters, before administrative agencies, Federal courts and 

Congress. 

For several years, Mr. Lay has represented and advised the National League of Cities, the National Association of Counties, the 

U.S. Conference of Mayors, the National Association of Telecommunications Officers and Advisors, and other local government 

organizations and individual municipalities, on communicationstax-law matters. 

He has represented municipal organizations in connection with, 

among other communications-tax-law-related matters, the Telecommunications Act of 1996, the Internet Tax Freedom Act and its 

extensions, the Mobile Telecommunications Sourcing Act of 2000, 

and previous bills in Congress to reform State and local telecommunications taxes. 

I thank you all for your willingness to participate in today’s hearing. Without objection, your written statements will be placed into 

the record in their entirety. And we are going to ask that you limit 

your oral testimony to 5 minutes. 

You will note that we have a lighting system. And when we remember to employ it, you will be given a green light at the beginning of your time. You will get a yellow light when you have a 

minute remaining in your time, and then, of course, when your 

time expires, you will see the red light. 

If you are caught mid-sentence or mid-thought, we will, of course, 

allow you to finish that sentence or thought before we move on to 

the next witness. So with that, I—and after each witness has presented their testimony, we will have a round of questioning from 

the Members here, subject to the 5-minute limit. 

So, with that, I am going to go ahead and invite Commissioner 

Mahoney to please give us her oral testimony. 

TESTIMONY OF GAIL W. MAHONEY, COMMISSIONER, JACKSON 

COUNTY, MICHIGAN, JACKSON, MI, ON BEHALF OF THE NATIONAL ASSOCIATION OF COUNTIES 

Ms. MAHONEY. Thank you Chairwoman Sa ́nchez, and the distinguished Members of the House Subcommittee on Commercial and 

Administrative Law. 

My name is Gail Wallace Mahoney, and I am a county commissioner from Jackson County, Michigan, currently completing my 

seventh term. I am also a member of the Board of Directors for the 

Michigan Association of Counties, and also the National Association of Counties, NACo. I am currently serving as the chair of the 

Finance and Intergovernmental Affairs Steering Committee. 

I appreciate the opportunity to be before you today on behalf of 

NACo, also the National League of Cities, the United States Confronted of Mayors, the National Association and Telecommunication Officers and Advisors, and the Government Finance Officers 

Association. 

We are witnessing an explosion in the telecommunications technology. Every day, we see new products being introduced to the 

marketplace; new, better, faster services being marketed to America’s public. 

In a recent report from the FCC, it was stated that there were 

33.8 million cell-phone subscribers in 1995. Simply 12 short years 

20 

later, we have seen a 700 percent increase, up to 255.4 million subscribers. Along with that explosion, we have also seen an explosion 

in the companies’ profits. 

Even to the casual observer, it is clear that the current tax statement of cell-phone services by the Federal, State and local authorities has not hindered the product innovation and services for financial growth. But that is not to say that the improvements to the 

telecommunication-tax schemes can not be made. 

Local governments have called for comprehensive reform that 

would ensure revenue’s neutrality, and ensure that functionally 

equivalent services that make use of different technologies are 

treated in a similar manner. But the telecommunications-tax reform should not be a disguise for Federal preemption of State and 

local governments’ taxing authority, nor does comprehensive reform 

mean that a piecemeal approach would give preferential treatment 

to any services, or a means of its delivery. That is what H.R. 5793 

will do. 

Unlike the Federal Government, which has a projected deficit of 

about $407 billion—really, we believe it is about $700 million— 

most States and local government are required to balance their 

budgets. This job has become more and more increasingly difficult 

across the country, and in many jurisdictions. 

It is reported by the Center on Budget Policy Priorities that at 

least 29 States face a combined budget shortfall of $48 billion for 

fiscal year 2009. California, alone, nearly has about half that 

amount. It is expected that more States will join that list in revenue forecasts updated, probably after the election. 

If the combined house collapse and ever-increasing number of 

home foreclosures—throwing in a little bit of unemployment, a 

stagnant growth in economy, a pinch of high fuel costs and a dash 

of investment—bankruptcies from investment firms—you have a 

recipe for economic mess, currently confronting State and local governments. 

To make up revenue shortfalls, many local governments find 

themselves in a position of spending reserves, cutting services such 

as fire, police, teachers, and also increasing taxes. Jackson County’s unemployment rate is higher than the national average. We 

are reaching nearly an 8 percent increase in unemployment. In addition, the county has been particularly hit hard by mortgage foreclosures and, also, mortgage fraud. 

Because of this situation, along with the downturn of the national economy, we will have to make some significant reductions 

in county expenses. We are looking at a possible $1.5 million shortfall in 2009. As a county commissioner, completing my 14th year, 

it is my job to make these very difficult decisions. This is going to 

affect our coworkers, people that I love and people that, you know, 

worked for the county for over the past 14 years, that I have become acquainted with. 

These people are facing a possible 83 people we are going to have 

to cut from our budget. That is why it is so important that the officials actually do everything that they can to try and provide an opportunity to have every revenue opportunity that we can. We cannot afford to have anything taken off the table. 

21 

Faced with these looming economic problems, the last thing Congress needs to do is to enact legislation that would preempt the 

taxing authority of State and local governments, especially such 

preemptions that will result in the preferential treatment of any 

one technology over another. 

The true aim of this legislation is Federal preemption that reduces the level of taxes that cell-phone industry pays the State and 

local governments, and an increase to everyone else’s taxes. The 

consumers which have switched their services from local landlines, 

now, to a cell phone—these revenues are eroding the city and county’s income. 

This may force localities to rely even more heavily on property 

and income taxes. Congress must not take actions that will make 

an already-difficult job even harder. 

Thank you for the opportunity to provide this testimony today on 

behalf of NACo. And I would ask that my full written statement 

be made part of the record. And I look forward to answering any 

questions. Thank you. 

[The prepared statement of Ms. Mahoney follows:] 

22 

PREPARED STATEMENT OF THE HONORABLE GAIL W. MAHONEY


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Ms. SA ́ NCHEZ. Thank you, Ms. Mahoney. 

At this time, I would invite Mr. Clayborne to give his testimony. 

STATEMENT OF THE HONORABLE JAMES F. CLAYBORNE, JR., 

ILLINOIS STATE SENATOR, BELLEVILLE, IL 

Mr. CLAYBORNE. Thank you, Chairman Sa ́nchez, Ranking Member Cannon, and Members of the Subcommittee. 

My name is James Clayborne. I am the assistant majority leader 

in the Illinois State Senate. I am also a member of the National 

Conference of State Legislator’s Communication, Financial Services 

and Interstate Commerce Committee, which recently reaffirmed its 

Communications Policy Statement, calling for fair and equitable 

taxation of communication services. 

Thank you for the opportunity to appear before you today to testify regarding the importance of H.R. 5793, the ‘‘Cell Tax Fairness 

of 2008.’’ To my constituents and the more than 9.5 million wireless consumers in Illinois, Congresswoman Lofgren and Congressman Cannon, are to be commended for the broad bipartisan support they have garnered for this bill. 

As you might imagine, as a State senator—a State legislator— 

my Federal bill limiting a State’s ability to tax is something I take 

quite seriously. Our system of federalism provides State and local 

policymakers with the authority to decide how the State should impose taxes on individuals, businesses that reside within their jurisdiction. 

The State’s authority to impose that revenue—raise revenue to 

fund government services is a concept that I strongly support. 

However, I believe that another fundamental tenent of our Nation’s 

tax system is that taxes should be levied fairly on citizens, particular in situations where multiple levels of government may have 

the authority to tax. 

One only needs to look at his or her own wireless bill to see that 

there is nothing fair about the countless number of taxes and fees 

that wireless customers pay today. H.R. 5793 is a carefully crafted 

piece of legislation that calls for a temporary 5-year time-out on 

any new discriminatory tax or fee from being added on top of existing levels of taxes imposed upon wireless services. 

H.R. 5793 is entirely prospective, meaning that any tax or fee 

that is currently being collected by States and localities will continue to be collected. I believe that the prospective nature of this 

legislation is extremely important because it recognizes the revenue needs of States and municipalities. 

Last year, the wireless consumers paid nearly $21 billion to 

State, local and Federal Government. None of the $21 billion would 

be rescinded under this legislation. 

My focus here today would be to discuss how we got to where we 

are today, and why I believe that taking a time-out from additional 

discriminatory taxes imposed upon wireless consumers is important to my constituents, and consistent with the principles adopted 

by the NCSL. 

The average rate of Federal, State and local taxes and fees on 

wireless is 15.2 percent, compared to the average rate imposed on 

goods, services—which is just over 7 percent—this means the tax 

26 

rate on wireless services are more than double the rate on other 

goods and services. 

Looking at my home state of Illinois, it is ranked the ninth-highest in the country, with an average rate of close to 17 percent. A 

tax rate of 17 percent upon service that I believe is critical to many 

of my constituents is a financial burden. But imagine adding an additional tax on wireless consumers. 

Last year, Cook County, Illinois, which encompasses most of the city of Chicago, sought to impose a $4-per-line-per-month tax on 

communication services. There was no specific purpose given to justify the tax aimed solely at communication services. Rather, the 

revenue was going to be used to plug a hole in the county’s generalfund budget. 

Had the proposed Cook County tax been added, the rate of taxes 

and of fees on wireless services, if purchased by the citizens of Chicago, would have increased to an average of 24 percent. 

When the people of Cook County learned of the proposed tax increases, 3,300 consumers took time to contact their county officials 

to voice their opposition. The actions of these consumers in Cook 

County demonstrate just how unpopular these targeted wireless 

taxes are with consumers. 

As we all know, wireless services are no longer considered a luxury. For millions of Americans, these services are crucial to their 

everyday lives, and yet they are taxed at levels that are double or 

even triple the rates imposed on other goods and services. Imposing 

regressive consumption taxes on consumers of an essential service 

such as wireless disproportionately impacts low and middle-income 

consumers, with—unfortunately, can put this critical service out of 

financial reach for some of my constituents, who need it the most. 

Had the proposed tax by Cook County go into effect, the Chicago residents will be paying an additional $12 on a $50 bill. Taxing on 

wireless services at that rate is more than double the rate imposed 

upon goods and services—artificially increases the cost of services, 

and which hurts the economic gains that could be achieved by having a more rational tax policy. 

Over the past 8 years, NCSL has made communications-tax reform a major priority for States to consider. The committee, as well 

as separate tax force, has spent considerable time educating statepolicy makers on the need to simplify and modernize the taxes imposed upon communications services. Even though the communications-tax reform has been a major topic of NCSL, little progress in 

achieving such reforms has been made. 

I believe this Subcommittee is uniquely situated to address the 

disparate tax treatment of an inherently interstate service. As 

someone who comes from a State that imposes a 17 percent tax on 

wireless services, I know that once these taxes are in place, it is 

very difficult to reduce them. Preventing the imposition of new, additional discriminatory taxes on consumers, while we try to fix the 

existing system, will be both an economic benefit to consumers, and 

will also help those who cannot afford a computer enjoy the benefits of wireless broadband. 

Last year, it was estimated that wireless consumers in my State 

paid almost $1 billion in State, local and Federal taxes—— 

Ms. SA ́ NCHEZ. Yes. 

27 

1FCC, Annual Report and Analysis of Competitive Market Conditions with Respect to Commercial Mobile Service: Twelfth Report, FCC 08–028 (Feb. 4, 2008). 

Mr. CLAYBORNE [continuing]. And fees imposed upon their wireless services. By anyone’s measure, be it from State or Federal perspective, that is a lot of money, from the one subset of consumers, 

to pay on an essential service. 

That is why I strongly support the passage and enactment of 

H.R. 5793, the ‘‘Cell Tax Fairness Act of 2008.’’ 

Thank you again for this opportunity to speak to you today. I 

would be happy to answer any questions you may—— 

[The prepared statement of Mr. Clayborne follows:] 

PREPARED STATEMENT OF THE HONORABLE JAMES F. CLAYBORNE, JR. 

Chairwoman Sa ́nchez, Representative Cannon, and members of the Subcommittee, my name is James Clayborne, and I am the Assistant Majority Leader 

of the Illinois State Senate. I am also a member of the National Conference of State 

Legislator’s (NCSL) Communications, Financial Services & Interstate Commerce 

Committee which recently reaffirmed its communications policy statement calling 

for fair and equitable taxation of communications services. 

Thank you for the opportunity to appear before you today to testify regarding the 

importance of H.R. 5793, the ‘‘Cell Tax Fairness Act of 2008’’ to my constituents and 

the more than 9.5 million 1 wireless consumers in Illinois. Representatives Lofgren 

and Cannon are to be commended for the broad bi-partisan support they have garnered for this bill. 

As you might imagine, as a state legislator, any federal bill limiting a state’s ability to tax is something that I take very seriously. Our system of Federalism provides 

state and local policymakers with the authority to decide how states should impose 

taxes on individuals and businesses that reside within their jurisdictions. The 

states’ authority to impose taxes that raise revenues to fund government services 

is a concept that I strongly support. 

However, I believe that another fundamental tenet of our nation’s tax system is 

that taxes should be levied fairly on our citizens, particularly in situations where 

multiple levels of government may have authority to tax. One only needs to look 

as far as his or her own wireless bill to see that there is nothing fair about the 

countless number of taxes and fees imposed upon wireless services today. 

The purpose of H.R. 5793, precluding new discriminatory taxes from being added 

on top of the existing excessive level of taxes imposed upon wireless services, is an 

idea that is hard to disagree with. While convergence, competition and the dynamic 

changes that have taken place within the communications industry makes it critical 

for state policymakers to simplify and reform the current state and local taxes imposed upon all communication services and property, that goal is going to take some 

time to accomplish. It makes sense that state and local governments should not be 

enacting new discriminatory impositions when policymakers and the industry are 

continuing to work towards eliminating the ones that currently exist. Specifically for 

services that consumers rely upon for their communication, information and public 

safety needs 

My focus here today will be to talk about how we got to where we are today and 

why I believe that taking a ‘‘time-out’’ from having new, additional discriminatory 

taxes imposed on wireless services is important to my constituents and consistent 

with the principles adopted by NCSL at its annual meeting. 

HIGHLIGHTING THE PROBLEM

The tax structure imposed upon the communications industry today is a carryover 

from the days when the industry was operated by Ma Bell as a rate regulated utility. This tax structure was created well before the first wireless call was ever made. 

As regulated utilities, providers were subject to taxes under statutes applicable to 

‘‘public utilities.’’ The taxes imposed included gross receipts, franchise and other industry-specific taxes that were then passed on to consumers in the rates as part of 

the regulatory rate setting process. The phone company never had to worry about 

the consumer looking for a cheaper alternative because there was no competition in 

the marketplace. State and local governments could tax telecommunication services 

at much higher rates than any other goods and services without worrying about an 

28 

2Katherine Barrett & Richard Greene, Growth & Taxes, Governing Magazine (January 2008). 3Scott Mackey, Excessive Taxes & Fees on Wireless: Recent Trends, State Tax Notes (Feb. 18, 

2008). 

outcry from unsuspecting constituents, because ‘‘it was just the phone company raising rates again.’’ 

Since the introduction of wireless services in the late 1980’s and the passage of 

the Federal Telecommunications Act of 1996, the marketplace for communication 

services has changed substantially. Communications services are no longer provided 

by only a single provider, the ‘‘rate-regulated’’ utility. Consumers now have many 

options to choose from for their communications services as a number of extremely 

competitive industries bring innovation and change to consumers at a rapid pace. 

The wireless industry alone provides communication services to over 260 million 

consumers. That is a staggering number of consumers enjoying the benefits of wireless mobility when you consider that only fifteen years ago there were just 13 million wireless consumers. The days of wireless services being considered a luxury 

that only the wealthy can afford are over. Today these services are critical to my 

constituents and, as with many other wireless consumers across the country, are 

considered a necessity. Likewise, wireless broadband services may be the only access that many consumers have to the internet. For better or worse, we can all be 

‘‘connected’’ 24/7 if we choose to do so. 

Unfortunately, the tax structure hasn’t kept pace with all the exciting innovation 

and technological changes taking place in the industry. The January 2008 issue of 

Governing magazine stated ‘‘And yet, state tax structures, developed at a time when 

computers—‘‘thinking machines’’—were the stuff of science fiction, and the American economy flourished with the automobile industry, have failed to evolve. To take 

one example, there is the outmoded way in which telecommunications companies 

are taxed. A reliable, high-quality and affordable telecommunications system is essential to the economic competitiveness of states—to say nothing of the nation. And 

yet, these systems are subject to very high taxation rates in a number of states— 

by a tax approach set when the industry, dominated by one telephone company, was 

highly regulated.’’ 2

Instead of undertaking the difficult task of reforming the tax structure for the industry in total, the wireless industry and its consumers have seen many of these 

antiquated ‘‘utility’’ taxes from the last century simply extended to wireless services 

under the guise of ‘‘leveling the playing field.’’ I support this bill because I don’t believe that making the situation worse before we tackle the difficult task of making 

it better for my constituents is the right answer. 

The study published by Mr. Mackey earlier this year indicated that the national 

average rate of federal, state and local taxes and fees on wireless services is 15.19% 

compared to the average rate imposed upon other goods and services of 7.07%.3 That 

means the rate of tax on wireless services is more than double the rate on other 

goods and services! When I look at my home state of Illinois, it is ranked the 9th 

highest in the country with an average tax rate of close to 17%. It appears that we 

have some work to do to in my state to try to lower the rate imposed on wireless 

services to the rate imposed upon other goods and services, which averages about 

8–9%. 

A tax rate of 17% imposed upon services that I believe are critical to many of my 

constituents is burdensome, but imagine adding an additional tax on wireless services to that rate. I was very surprised to learn that a County in my state actually 

attempted to do just that last year. Cook County, Illinois, which encompasses most 

of the City of Chicago, was seeking to impose a $4 ‘‘per line, per month’’ tax on communication services. There was no specific purpose given to justify the imposition 

of this tax solely on communication consumers—rather, the revenue was going to 

be used to plug a hole in the County’s general fund. 

Had the proposed Cook County tax been enacted, the rate of taxes/fees on wireless 

services purchased by citizens in the City of Chicago would have increased to, on 

average, a rate of 24%. Now, if consumers in Cook County had the opportunity to 

approve this new tax, then I might not question the fairness of it. However, the 

county council was deciding for wireless consumers—the county was not going to 

put this proposal to a vote of the people. After the wireless industry educated its 

consumers about this new proposed ‘‘phone tax,’’ over 3,300 consumers took the time 

to contact their county officials to speak out against this tax. The actions of these 

consumers in Cook County demonstrate just how unpopular these targeted wireless 

taxes are with consumers. 

When you consider how important wireless services have become to consumers 

today, taxing these services at such an excessive level is counterintuitive to me. 

Rates frequently approach the level of so-called ‘‘sin’’ taxes. Policymakers typically 

29 

4 John Horrigan, Mobile Access to Data and Information, Pew Internet & American Life 

Project (March 2008). 5 Id. 

6 Id. 

7 Id. 

impose sin taxes when they want to discourage consumption of certain products, 

such as alcohol and tobacco. It is hard to understand why a service that many of 

my constituents consider a safety lifeline is taxed at nearly 20% per month. A rate 

meant to discourage usage, not encourage it. 

I believe we all can acknowledge that communication services, and wireless services in particular, are a vital component of this country’s economic growth and stability. Mr. Mackey cites several facts in his testimony on the productivity benefits 

that the wireless industry provides to the overall economy. It is hard to believe that 

any reasonable policymaker would continue to think that imposing new discriminatory taxes on wireless services is appropriate. 

PROTECTING WIRELESS CONSUMERS FROM EXCESSIVE TAXES IS IMPORTANT TO MY

CONSTITUENTS

As has been mentioned before, wireless services are no longer considered a luxury. 

For many Americans, these services are crucial to their everyday lives and yet they 

are taxed at levels that are double or even triple the rates of tax imposed on other 

goods and services. Imposing regressive consumption taxes on consumers purchases 

of wireless services disproportionately impacts low and middle income consumers 

which can put this critical service out of reach for some of my constituents that need 

it the most. 

According to the Pew Internet & American Life Project, when respondents were 

asked how hard it would be to give up a specific communication service, cell phones 

received the top ranking over the Internet and television.4 The Pew study also found 

that 84 percent of English-speaking Hispanics, 71 percent of African-Americans and 

74 percent of non-Hispanic white Americans have cell phones.5

As was stated before, wireless devices are being used to do far more than just 

make phone calls. Wireless technology also provides people with the ability to remain connected to friends, family and, in this new information age, to be able to 

access the Internet. Recent studies have shown that minorities constitute a growing 

proportion of total demand for wireless, particularly the newest data services, like 

broadband. 

On a typical day, 77 percent of all Americans with cell phones have sent or received text messages, taken a picture, played a game, sent or received e-mail, 

accessed the Internet, recorded a video, played music, sent or received an instant 

message, used a map, or watched a video on their cell phone.6 Breaking down the 

details, the highest percentage of use is from minorities: 90 percent of Englishspeaking Hispanics and 77 percent of African-Americans have done at least one of 

these activities compared to 73 percent of non-Hispanic white Americans.7

Adoption of new technologies, in particular the use of wireless phones and wireless broadband, has driven and improved productivity, economic growth, and household income in the United States. Recent studies have demonstrated that policies 

supporting affordable wireless services that allow for increasing wireless use should 

lead to income and productivity gains by all Americans, particularly low income 

wireless users. 

Whether it is a small business owner tracking orders ‘‘on the go,’’ an employee 

answering e-mails on a wireless device outside of the office, or a family physician 

using a handheld device to input patient information and prescriptions, wireless has 

delivered enhanced efficiencies and greater convenience. Taxing wireless services at 

a rate that is more than double the rate imposed upon other goods and services is 

artificially increasing the cost of these services which in turn hurts the economic 

gains that could be achieved by having a more rational tax policy. 

CONCEPT IS CONSISTENT WITH NCSL TELECOMMUNICATIONS TAX REFORM PRINCIPLES

Over the past eight years, NCSL has made communications tax reform a major 

priority for states to consider. The Committee as well as a separate task force has 

spent considerable time educating state policymakers on the need to simplify and 

modernize the taxes imposed upon communications services as well as the benefits 

in doing so. 

The most recent set of principles for communications tax reform that have been 

unanimously endorsed by the NCSL are set forth below: 

30 

8 Unanimously passed the NCSL Communications, Financial Services and Interstate Commerce Committee Business Meeting, November 28, 2007—Passed on voice vote during the full 

NCSL Business Meeting November 30, 2007—Passed on voice vote during NCSL Annual Business Meeting, July 25, 2008. 

TAXATION OF COMMUNICATIONS SERVICES 

Transaction taxes and fees imposed on communications services should be simplified and modernized to minimize confusion, remove distortion and eliminate discrimination regarding the taxability of telecommunications services. The National 

Conference of State Legislatures encourages elected policymakers at all levels of 

government to work together to simplify, reform and modernize communications 

taxes based upon the following principles: 

Tax Efficiency: taxes and fees imposed on communications services should be 

substantially simplified and modernized to minimize confusion and ease the burden 

of administration on taxpayers and governments. 

Competitive Neutrality: transaction taxes and fees imposed on communications 

services should be applied uniformly and in a competitively neutral manner upon 

all providers of communications and similar services, without regard to the historic 

classification or regulatory treatment of the entity. 

Tax Equity: Under a uniform, competitively neutral system, industry-specific 

communications taxes are no longer justified, except for fees needed for communications services such as 911 and universal service. 

State Sovereignty: Other than the prohibition of taxes on Internet access, NCSL 

will continue to oppose any federal action or oversight role which preempts the sovereign and Constitutional right of the states to determine their own tax policies in 

all areas, including communications services.8

Except for the very last provision addressing state sovereignty, the concepts in 

H.R. 5793 are very consistent with this policy statement. Under a uniform and competitively neutral system, industry specific taxes are no longer justified. Unfortunately, without proceeding with the reforms needed to the current tax structure, the 

system will remain confusing and inequitable. Extending industry specific ‘‘utility’’ 

taxes to wireless services is not the right answer. The concepts in H.R. 5793 are 

intended to guard against having the taxation of communications services become 

more onerous before the reforms set forth in the NCSL policy statement can be implemented. 

Even though communications tax reform has been a major topic at NCSL, little 

progress in achieving such reforms has been made. One area where we have seen 

moderate success has been in the simplification of some of the existing taxes by reducing the number of returns communications providers are required to file. Illinois 

was one of those states, where several local impositions were consolidated into one 

tax that is filed with the state, significantly reducing the number of returns required to be filed that was required when returns were filed with the local governments. 

While the simplification effort was helpful, the state still has not engaged in serious discussions with stakeholders about formulating a plan to reduce the high rate 

of taxes imposed upon communication consumers. Given the budget deficits that 

many states will be facing, I believe it will be difficult to quickly accomplish the reform that is required to reduce the existing excessive rates of taxes on communication services any time soon. 

Having said that, it is an issue that we must continue to focus on. In the interim, 

we should ensure that no new discriminatory taxes will be imposed on wireless services. As a state that currently imposes an onerous tax burden on communication 

services, I can honestly state that once these taxes are in place they are very hard 

to eliminate. Preventing the imposition of new burdensome taxes on consumers 

while we try to fix the existing system makes a lot of sense. 

Last year, it was estimated that wireless consumers in the state of Illinois paid 

almost $1 billion in state, local and federal taxes and fees imposed upon their wireless services. By anyone’s measure, be it from a state or federal perspective, that 

is a lot of money for one subset of consumers to pay on an essential service. That 

is why I strongly support the passage and enactment of H.R. 5793, the ‘‘Cell Tax 

Fairness Act of 2008.’’ 

Thank you again for this opportunity to speak to you today. I would be happy to 

answer any questions that you might have at the appropriate time. 

Ms. SA ́ NCHEZ. Thank you, Mr. Clayborne. 

We have just received notice that we have votes pending across 

the street. But I think we do have time to have Mr. Mackey give 

31 

his oral testimony, assuming that you can squeeze it in between 

the 5- and 6-minute mark. 

STATEMENT OF SCOTT R. MACKEY, ESQUIRE, 

KIMBELL SHERMAN ELLIS, MONTPELIER, VT 

Mr. MACKEY. Thank you very much, Chairwoman, and Members 

of the Committee. 

I will stay within my time. I just want to reiterate two important 

points that Ms. Lofgren made during her opening remarks. 

First of all, this bill would not preempt any existing taxes. So 

there would be no fiscal impact from this bill on any State or local 

government that is currently, today, imposing taxes—even discriminatory taxes—on wireless consumers. 

And it would allow new taxes, provided that those new taxes 

were not singling out wireless consumers, but were part of a broadbased tax increase to meet revenue needs for local government. So 

this bill only affects new discriminatory taxes—the ones that, as we 

have heard, are burdening consumers. 

I am going to just skip over some of the things I said in my prepared remarks, and just focus on a couple of things that some of 

the folks claim that this bill would do, because I think, in some of 

the testimony, some of the local governments are claiming that we 

have not made the case that there is excessive or discriminatory 

taxes on wireless consumers. 

And as a side note, I would say, if there are no discriminatory 

taxes imposed today, then governments have nothing to worry 

about from this bill, because it only affects discriminatory taxes. 

In terms of whether there is a problem, NCSL, the Governor’s 

Association, Governing Magazine—many, many people have said 

that there is, indeed, a problem. So I don’t think we can just say 

that this something—that the wireless industry has somehow 

cooked the numbers to show that there is a problem. 

There is a problem. And, you know, I would not tell a consumer in Baltimore City, that has, you know, a typical $50 plan with two 

lines, that is paying $11.50 in taxes a month versus if they walked 

into the hardware store and bought something for $50—they would 

pay $2.50. Or, in Chicago, where a same—similarly situated consumer—would pay $12 a month on their wireless bill, and only pay 

$5 if they bought something from the store. So, clearly there is a 

problem here. 

But there is not a problem in every State. It is limited to certain 

States that have really targeted wireless consumers. 

As has been mentioned, these are regressive taxes. There are 

many, many lower and moderate-income people that have plans 

and—that, in particular—the trend toward a per-line charge, instead of a percentage of your bill—is very, very burdensome on 

lower-income people, who have multiple lines on the same plan— 

family share plans and the like. 

Consumers are really spending a lot, and, really, this bill, as has 

been suggested, is about the consumer. The notion that the local 

governments are willing to talk about reform, and that this bill 

would actually discourage reform—I worked on this issue for the 

last 10 years of my career, and the facts would really suggest otherwise. When the industry and others have sat down with local 

32 

governments to talk about reform, we have not been able to make 

any progress. 

We are facing new taxes right now from local governments in 

California, Oregon, Missouri, Maryland and New York. And one of 

the reasons why we haven’t had consensus on reform is, because, 

to a lot of local governments, reform means, ‘‘Let us make wireless 

consumers pay all the taxes that are legacy from the regulated era 

that are now being levied on the landline phones.’’ And reform 

means, ‘‘Let us bring everybody up to the highest level of taxation.’’ 

And we think reform means, ‘‘Let us bring everybody down to a 

level that is being imposed broadly on all goods and services that 

are subject to the tax, and not single out specific services for those 

types of discriminatory taxes.’’ 

And then, finally, the issue of, ‘‘Why wireless? Why should the 

Congress look at wireless as an industry that deserves—the consumers deserve protection from new discriminatory taxes?’’ Well, 

clearly, the wireless industry is federally licensed and regulated. 

Congress and the FCC have set the rules and granted the licenses 

that dictate how and where wireless providers are able to sell their 

service. 

So Congress is already heavily involved in this industry. And it 

is a fundamentally interstate industry. I mean, this is an industry 

where folks with wireless phones start a call in one jurisdiction, 

can cross a boundary—and that, in fact, is why Congress decided 

it had to get involved and actually make the rules for allocating 

which jurisdictions were able to tax. And that is the Mobile 

Telecom Sourcing Act that Congress passed 5 or 6 years ago. 

So, clearly, this is an interstate service, and the Federal role is 

already well established. 

And then, finally, more and more economic studies have showed 

that wireless industry has a disproportionate share in our economic 

growth. And if we are going to do the kind of things that Representative Lofgren said, instead of—in terms of setting the stage 

for new technologies, new ways that American businesses and—are 

going to be more productive—then we can’t have taxes that discourage investment and force consumers to have to choose not to 

adopt and purchase certain services because the tax burden is too 

high, and they can’t afford to choose them. 

So, in summary, thank you, again, for the opportunity to testify. 

I look forward to questions. This bill is really about protecting the 

consumer. And it needs to be passed. And I hope you will move to 

a markup as soon as possible. 

Thank you. 

[The prepared statement of Mr. Mackey follows:] 

33 

PREPARED STATEMENT OF SCOTT R. MACKEY


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Ms. SA ́ NCHEZ. Thank you for your testimony, Mr. Mackey. 

At this time, we will recess to walk across the street to vote. And 

we will resume the hearing as soon as the last vote is finished. 

[Recess.] 

Ms. SA ́ NCHEZ. The Subcommittee will now come to order. And we 

thank the witnesses for their patience while we were across the 

street voting. 

We are going to try to finish the hearing—have a thorough hearing, but finish it within the hour, if possible, because we are expecting another round of votes. 

So I am going to just jump in very quickly, and ask Mr. Lay to 

give his oral testimony. 

STATEMENT OF TILLMAN L. LAY, ESQUIRE, SPIEGEL & 

McDIARMID, LLP, WASHINGTON, DC, ON BEHALF OF THE U.S. 

CONFERENCE OF MAYORS, THE NATIONAL LEAGUE OF CITIES, THE GOVERNMENT FINANCE OFFICERS ASSOCIATION, 

THE NATIONAL ASSOCIATION OF TELECOMMUNICATIONS 

OFFICERS AND ADMINISTRATORS 

Mr. LAY. Thank you. Good afternoon, Chairwoman Sa ́nchez, and 

Members of the Subcommittee. 

I am Tillman Lay, of the D.C. law firm of Spiegel & McDiarmid, 

and I am testifying on behalf of the U.S. Conference of Mayors, the 

National League of Cities, the National Association of Counties, the 

National Association of Telecommunications Officers and Advisors, 

and the Government Finance Officers Association. 

We oppose H.R. 5793. Its proposed moratorium on State and 

local wireless taxes represents an unwarranted Federal intrusion 

into the long-recognized authority of State and local governments 

to establish tax classifications. And it would open the door to other 

industry sectors asking for similar preemption of State and local 

tax-classification authority. 

The Supreme Court has long recognized that State and local governments have broad discretion in the field of taxation, where they 

possess the greatest freedom of classification. H.R. 5793 departs 

radically from this longstanding principle of federalism. 

It would single out one subpart of the telecommunications-industry sector, wireless services, for preferential, preemptive protection 

from State and local tax classifications. That would set a precedent 

that would endanger State and local tax authority and tax-classification authority in at least two ways. 

First, it would move us further away from State and local government efforts at telecommunications-tax reform. The bill would 

require that State and local governments treat wireless services 

more preferentially than their landline-telecommunications-service 

competitors. Narrowing the permissible tax base for telecommunications to landline service would put upward pressure on State and 

local landline-telecommunications-service taxes, and, likely, on 

State and local public-utility taxes as well. 

Second, the bill would set a dangerous standard for Federal 

intervention into State and local-government tax classifications. If 

taxing any industry sector or service at a rate different from the 

general business-sales-use tax rates constitutes a discriminatory 

42 

tax, then there would be no limit at all to Federal preemption of 

all State and local tax classifications. 

And you can expect other industries that are subject to different, 

and, often, higher, State and local tax classifications, such as the 

utility, petroleum distribution, entertainment, transportation and 

other industries, to ask Congress for similar preemptive relief from 

State and local tax classifications. 

Moreover, the legislation is a solution in search of a problem. 

Supposedly excessive State and local wireless fees and taxes notwithstanding, the wireless industry has enjoyed remarkable growth 

in terms of subscribership, revenues, and investment—over the 

past 7 years. 

According to the FCC, wireless-industry subscribership has 

grown 158 percent since 2000, and wireless-industry revenue has 

grown 124 percent over that same time period. 

The wireless industry’s claim of excessive taxes and fees are 

based upon an apples-and-oranges mix of Federal, State and local 

fees and taxes, many of which would not be affected by H.R. 5793 

at all. 

CTIA has claimed that about 15 percent of each customer’s 

monthly bill already goes to taxes and fees. But this 15 percent figure includes Federal taxes and Federal Universal Service Fund 

charges. The 15 percent figure also includes State Universal Service Fund and State and local 911 fees—two more categories of fees 

that the bill exempts from its reach. And the 15 percent figure also 

includes State and local general sales-and-use taxes, which, of 

course, would also not be subject to the bill’s moratorium. 

By singling out State and local wireless taxes for preemption, industry is seeking to shift all of the blame and all of the fiscal burden to local governments and their general funds, not for the taxes 

they have imposed, but for the various user fees imposed by the 

Federal and State and local governments that the bill would not 

preempt. 

Eight years ago, local government organizations and the wireless 

industry worked together to develop and support the enactment of 

the Mobile Telecommunications Sourcing Act. The MTSA assures 

political accountability. A State or wireless tax will end up being 

paid by the constituents of the State or local government that imposes the tax. 

No elected official enjoys imposing or increasing any tax. And 

that is just as true of State and local elected officials, as it is Members of Congress. There is one difference, however. State and local 

governments must balance their budgets. And political accountability ensures that if State or local government constituents who 

pay a wireless tax feel that that tax is excessive, there is a very 

effective cure. It is called the ballot box. 

H.R. 5793 violates all principles of political accountability. It 

would enable the Federal Government to place a preemptive ceiling 

on State and local taxing authority, while leaving to State and local 

elected officials the difficult task of deciding what other taxes to 

raise or what services to cut to compensate for action that the Federal Government, not they, took. 

43 

We, therefore, ask that the Subcommittee vote against approving 

H.R. 5793. Thank you for your time. And I would be happy to answer any questions you may have. 

[The prepared statement of Mr. Lay follows:] 

PREPARED STATEMENT OF TILLMAN L. LAY


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TLL-9.eps
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TLL-11.eps
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Ms. SA ́ NCHEZ. Thank you, Mr. Lay. We appreciate your testimony. 

We will now begin the round of questioning. And I will recognize 

myself first, for 5 minutes of questions. 

I am going to start with Ms. Mahoney. 

If Congress were to pass this legislation, what impact would it 

have on State and local revenues? 

Ms. MAHONEY. One of the issues is, for me, and for Michigan— 

if the Federal Government decides to limit this tax, the way we collect our current fees or try and balance our budget—for instance, 

you know, for me, if we were to have what Illinois has, at 17 percent, I think this would be a really good idea. But we don’t. 

And, if, for our constituents and the people within our State— 

to keep fire departments going, to keep police stations going—and 

we are able to say to our constituents, ‘‘We need this tax for that 

reason—you know, to increase 1 percent versus laying off police officers.’’ I think that we should be able to do that. 

And those are the kinds of things that I think—imposing it from 

a Federal level preempts us from being able to do that. 

Ms. SA ́ NCHEZ. Thank you, Ms. Mahoney. 

Mr. Clayborne, what do you hope to accomplish with the passage 

of H.R. 5793, and the 5-year moratorium? Because I am interested 

in knowing if this 5-year moratorium will actually just sort of lead 

the movement toward a permanent moratorium, or a ban on all 

taxation of wireless services. 

Mr. CLAYBORNE. I think what, essentially, happens is that you 

force the State, local and county governments to come together to 

begin to address this issue. 

Obviously, if we continue to—if this bill does not pass, then if 

every county in the State decides to raise it by 2 percent—there are 

102 counties in the State of Illinois. That tax will continue to go 

up. And it is obviously a burden on the poor. 

So we believe that the moratorium—— 

Ms. SA ́ NCHEZ. Do you see it, primarily, as a leverage to try to get 

people to sit down and talk about some real reform? 

Mr. CLAYBORNE. That is correct. 

Ms. SA ́ NCHEZ. Okay. 

I am just interested in knowing from you, Mr. Clayborne—as the 

Chairman of the Subcommittee, I have had various industries come 

to me to say, ‘‘We are being discriminated against in terms of 

taxes.’’ And just some of the industries that have come to ask for 

relief are the hotel industry, the car-rental industry, the satellitetelevision industry, Internet-access providers and big businesses, 

among several others. 

So I am interested in knowing your perspective. You know, why 

the carve-out for wireless, and not all the other industries that are 

coming to ask for the same kind of relief? Because the cumulative 

effect, I believe, if we were to say, ‘‘Yes,’’ to everybody, would be 

what Ms. Mahoney has mentioned; that, budgets for fire departments and police departments would be particularly hard-hit, especially at a time when, I believe, most States are facing huge economic problems. 

55 

Mr. CLAYBORNE. I think it is—the distinction between the other 

entities that you discussed is the fact that most of those are actually luxury. This has become essential. 

As Ms. Lofgren had stated—Congresswoman Lofgren stated—‘‘At 

my house, no one answers the house phone, because if you are intending to call my sons, then you either text them or you call them 

on their cell phone.’’ So it has become essential item in our daily 

use. 

I have two sons in college. I don’t even know the number to the 

dorm room, because they won’t answer it. This has become such an 

essential part of communicating, between texts, emails, as well as 

the actual phone itself. So that is the difference. 

Ms. SA ́ NCHEZ. That is the distinction? Okay. 

Mr. Lay, in his written statement, State Senator Clayborne suggests that it would be difficult for State and local governments to 

reform and reduce excessive rates of taxes on communication services. And that is sort of the justification why Federal legislation is 

necessary. 

Do you think that passage of this 5-year moratorium would lead 

to effective reform? 

Mr. LAY. No, I don’t. 

The difficulty is this: As I recall in his answer—and maybe you 

are confusing his with Mr. Mackey’s—the view of telecommunications-tax reform that industry has, as the only acceptable reform, 

is that industry be taxed just—just be subject to a generally applicable sales-and-use tax, no differential tax rate. And that is the difficulty. 

I don’t think the moratorium would result in that. In fact, for fiscal reasons, it would probably force local governments to raise 

taxes on landline telephone, which is a shrinking tax base, because 

that is all they would have left. They can’t increase or extend the 

telephone tax to wireless service anymore. 

Ms. SA ́ NCHEZ. Okay. Thanks. 

Mr. LAY. They would put us further away. 

Ms. SA ́ NCHEZ. Thank you, Mr. Lay. 

My time has expired, so I will recognize the Ranking Member, 

Mr. Cannon, for 5 minutes of questions. 

Mr. CANNON. Thank you, Madam Chair. 

And, you know, I was just sitting here, thinking. I had said earlier in my opening statement that these are regressive taxes. I 

think that is particularly difficult because I actually think that you 

are not smarter because you are rich. And if we want to tap into 

the genius of people who are not yet rich, you have to give them 

access to systems. 

And my understanding is that there are some jurisdictions that 

are taxing cell phones like $1.50—in some case, even more than 

that—per line. So in the case of my family, I have a family plan. 

Actually, we have a big family, so we have two family plans. And 

each additional person we put on that family plan costs about $5 

for the plan. 

And I see Mr. Mackey is nodding his head. Apparently, that is 

common. And, you know, if you add $1.50 tax on that line, that is 

like a 30 percent tax for that phone. 

56 

And, now, I bought my 10-year-old, now, a phone when she was 

8, because I figure that is one of the best ways to protect her. You 

know, she can dial, or we can locate—if she keeps the phone with 

her and she gets lost, we can locate her with, perhaps, the phone 

GPS system. 

So there are a lot of reasons to have a phone, but if you start 

putting a 30 percent tax on it, at some point, you actually really 

affect people’s ability to buy that, especially when you are in a— 

when your incomes are more marginal. 

I am in—you know, late in my career, as opposed to a young 

family that has two or three kids, and that tax could be more significant. 

Does that bother you, Mr. Lay, that we could be taxing at those 

kinds of rates on services that are profoundly important to the development of society? 

Mr. LAY. Well, I would first say that the fee you are talking 

about—and this is based upon Mr. Mackey’s table—to say that it 

is common is not accurate—that a tax of that level is not common. 

Mr. CANNON. No, I don’t think I said it is common. I just said 

that that is one of the fees, and that, you know—— 

Mr. LAY. And, well, there is—I mean, I suspect—I guess my reaction to that is, one, that would not happen unless the voters who 

pay that tax allowed elected officials to do that. There is an effective check on that. 

The other question that I—— 

Mr. CANNON. Let us go to that point, because, you know, my family has been through a number of plans over time, as almost everybody has, because it has been a pretty volatile market. 

So we ended up, at one point in time, where we had two very 

different plans. And within those plans, the bills went to different 

addresses. So my wife’s phone went to my home address and my 

phone, which was the same phone, went to my business address. 

And the bill was significantly different on my wife’s phone—higher. And the reason for that was because the local city taxed it at 

a much higher rate. 

And so it seemed to me that the only way to solve that was to 

move the address for the billing for her phone into my business, 

which, by the way, saves a lot of inconvenience anyway, because 

sometimes she doesn’t get around to paying the bills, and my office 

does. 

But I guess my point there is that people actually don’t—they 

are not going to change their elected officials over that kind of a 

thing. And, frankly, if—they may not even know about it or know 

what their bill is, compared to other people. Normally, they just 

take the bill and write out a check for the bottom line. 

Now, that doesn’t mean it doesn’t have an economic effect. But 

to say that voting is the way to change your phone bill seems to 

me to be a pretty tenuous relationship. 

Mr. LAY. Only if you say that it is tenuous, not just—if that is 

a statement that, basically, you can’t count on the democratic process to protect against excessive taxes as—do people want to tax 

themselves? I would suggest that is a question of the basic form of 

democratic government. I mean, that is what we have. 

Mr. CANNON. Okay. 

57 

Well, then, let me ask it this way: If you think that local voters 

should protect themselves by who they elect—I agree with that— 

is there a role for the Federal Government in eliminating the discriminatory taxes, especially in a case like cell phones, where you 

have this national market? 

I mean—— 

Mr. LAY. I think there is a national market for lots of goods and 

services—petroleum distribution, electric, gasoline. All are subject 

to taxes that, under this definition of discrimination, would be 

called discrimination. 

I would say—— 

Mr. CANNON. And we are working on several of those that you 

have just mentioned, of course. 

Mr. LAY. Yes. 

And, I guess, where I would have a problem is the notion that 

the Federal Government has the power, in our constitutional system, to, basically, rewrite and mandate all the State and local tax 

codes in this country. 

You have to remember that State and local governments, unlike 

the Federal Government, rely primarily on transaction taxes. The 

Federal Government relies more on income taxes. And on the issue 

of regressivity, I would suggest to you that, although all transaction taxes are somewhat regressive, utility and telecommunications taxes are actually a bit less regressive than general sales 

taxes, because their burden falls relatively more on businesses relative to residences. 

So if you shift it—— 

Mr. CANNON. I see that my time has expired. 

But let me just point out, in response to that last point, that that 

is generally true. But the nature of telecommunications is different 

from the nature of electricity and other kinds of services like that, 

in that communication is the foundation for progress for people. 

That is individual progress I am talking about. And, therefore, the 

regressivity, I believe, that is reflected in these kinds of taxes on 

cell-phone devices, or what Ms. Lofgren calls ‘‘computational devices,’’ is profoundly important. 

And with that, Madam Chair, I yield back. 

Ms. SA ́ NCHEZ. The gentleman yields back. 

At this time, I would like to recognize Zoe Lofgren, for 5 minutes. 

Ms. LOFGREN. Thank you, Madam Chair. 

And I went and, over the break, I had my staff get a copy of the 

innovation agenda that was rolled out by Speaker Pelosi, Congresswoman Anna Eshoo and myself, in September of 2005, actually. 

And on the front cover, there is a quote from John F. Kennedy. 

And it goes like this: ‘‘The vows of this Nation can only be fulfilled if we are first. And, therefore, we intend to be first. Our leadership in science and in industry, our hopes for peace and security, 

our obligations to ourselves, as well as others, all require us to 

make this effort.’’ 

And in the innovation agenda, we outlined, really, five things 

that we needed to do. And number three was ‘‘Affordable 

Broadband Access for all Americans.’’ That was right behind ‘‘Basic 

Research’’ and an ‘‘Educated Workforce.’’ 

58 

And the reason why is that this is not just another good and 

service. Broadband is an enabler of everything else. As we said in 

the innovation agenda, the deployment of high-speed, always-on 

broadband, Internet and mobile communications is going to fuel the 

development of millions of new jobs in the U.S. 

And just as railroads and highways did in the past, broadband 

and mobile communications are going to dramatically increase productivity, efficiency of our economy. And so this is an adopted policy of House Democrats. And it is our guiding principle of how we 

are going to sort through issues in the Nation’s interest. 

This isn’t just something that is of interest to cities or counties. 

This is a nationwide policy issue, which is why we are here today. 

Now, I just wanted to note—and then I will get into a quick 

question—the telecommunications companies aren’t paying these 

taxes. I mean, they are here advocating, I think, because they are 

concerned that, at some level, when you get too high, usage will 

drop off. I am not saying they are a disinterested party. But they 

are not paying these taxes. It is individuals. 

And, actually, the reason why I got interested in this is that, especially for low-income people, this is going to be the way to the 

Internet superhighway. And if we prevent low-income Americans 

from having that access to broadband, then our ability to meet the 

innovation-agenda goals is going to be impaired. 

Now, it has been suggested that this is an unprecedented step 

to take this. I don’t think that is correct. We did do the Internettax moratorium for exactly the same reason that this bill has been 

introduced. It is the same issue, which is broadband, and the enabler of innovation pursuant to our innovation agenda. 

But I am wondering, Mr. Mackey, do you have other examples 

where Congress, because of a national policy issue, took a similar 

type of action? 

Mr. MACKEY. Thank you. And I agree 100 percent with the 

premise that you just laid out. 

Yes, there have been other examples where Congress has decided 

that there is a compelling national interest—back in the 1970’s, 

when the railroad industry was in a lot of trouble. And what was 

going on is a lot of localities were sort of disproportionately taxing 

the property of railroads because they just had a sliver or ribbon 

of land that went through their community. 

Congress decided it was in the national interest to have a national framework where local governments would be permitted to 

tax railroad property, and tax railroads, but not in a way that discriminates. So there is somewhat of a parallel to this. 

There is also other instances, I think, with the airline and Interstate Motor Carrier Regulation, where Congress has stepped in and 

proscribed or prohibited local governments from taxing those 

things. 

But, clearly, you know, we don’t ask you to take this step lightly. 

And we have tried to work with localities, as I have said earlier—— 

Ms. LOFGREN. Right. 

Mr. MACKEY [continuing]. For the past decade. But it is our feeling, for the reasons you stated, Representative Lofgren, that there 

is a compelling national interest that, if we set up a framework 

59 

where States and local governments can tax telecom—we can do so 

fairly, in a nondiscriminatory manner—we are going to grow the 

jobs. We are going to, actually, we think, create more tax revenue 

because of the applications that are going to run and the jobs that 

are going to be created—— 

Ms. LOFGREN. I am about to run out of time. And I do think the 

rationale—for example, hotel taxes—I mean, we did high hotel 

taxes when I was in local government, because it is always easier 

to tax somebody else’s constituents. 

But, you know, actually, people don’t really look at the hotel tax. 

It is not the same kind of enabler of growth. It is not a fundamental building block of a high-tech innovation, educated society. 

It is not an enabler of other things in the same way that this is. 

I had other questions, but I have run out of time, Madam Chairwoman. I don’t want to abuse the process. So I yield back. 

Ms. SA ́ NCHEZ. The gentlelady yields back. 

Yes? 

Mr. CANNON. Madam Chair, I would like to ask unanimous consent to have included in the record the opening statement by the 

Ranking Member of the full Committee, Mr. Lamar Smith. 

Ms. SA ́ NCHEZ. Without objection, so ordered. 

[The prepared statement of Mr. Smith follows:] 

PREPARED STATEMENT OF THE HONORABLE LAMAR SMITH, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF TEXAS, AND RANKING MEMBER, COMMITTEE ON THE

JUDICIARY

Madame Chair, I would like to thank you for bringing attention during this Congress to a variety of discriminatory taxes. 

This is the latest in a series of hearings that have covered the Internet tax moratorium, the Mobile Workforce State Tax Simplification Act, the Business Activity 

Tax Simplification Act, and the State Video Tax Fairness Act. 

I would also like to thank Ranking Member Cannon for his leadership on this and 

so many other issues before the Commercial and Administrative Law Subcommittee. 

He has been instrumental in getting many bills passed during his tenure on the 

Committee and his insight, knowledge, and commitment will be missed next year. 

As for the ‘‘Cell Tax Fairness Act of 2008’’, through my involvement with the 

Internet tax moratorium and other matters it has become clear to me that telecommunications firms and consumers, and, in particular, wireless services, are 

taxed higher at the state level than many other businesses. 

In our increasingly mobile economy, we should encourage the deployment of cell 

phone and wireless devices and not inhibit them through higher taxes. The fact that 

these devices travel through interstate commerce and facilitate interstate commerce 

certainly gives Congress the authority to constrain the states’ taxing authority. 

However, just because Congress has the authority to do something does not mean 

that it should necessarily exercise that authority in every case. I am well aware that 

the power to tax power has traditionally been within the purview of the states. And 

given our shaky economy, I can certainly sympathize with states’ concerns about 

losing revenue because of Congressional intervention. 

So, I look forward to hearing from all our witnesses to see if there is a way that 

we can weigh the disproportionate taxation of telecommunications companies and 

consumers against the needs of states’ treasuries. 

Ms. SA ́ NCHEZ. And I would also ask that the opening statement 

from the Chairman of the full Committee, Mr. Conyers, be entered 

into the record, as well—— 

Mr. CANNON. Thank you. 

Ms. SA ́ NCHEZ [continuing]. And without objection, so ordered. 

[The prepared statement of Chairman Conyers follows:] 

60 

PREPARED STATEMENT OF THE HONORABLE JOHN CONYERS, JR., A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF MICHIGAN, CHAIRMAN, COMMITTEE ON THE JUDICIARY, AND MEMBER, SUBCOMMITTEE ON COMMERCIAL AND ADMINISTRATIVE LAW

As Members of Congress, we must carefully balance competing interests. We must 

ensure that the States do not burden interstate commerce through their taxing authority, while also ensuring that the authority of States to tax activity within their 

borders is maintained. 

Today, we consider H.R. 5793, the ‘‘Cell Tax Fairness Act of 2008,’’ which seeks 

to impose a five-year moratorium on any new discriminatory taxes and fees on mobile services, mobile service providers, and mobile service property. 

According to reports, taxes and fees account for about 15% of a consumer’s wireless services monthly bill. That burden seems higher than the burden imposed on 

other services and products. That burden could affect the free flow of commerce, stifle innovation, and be considered a regressive impact. 

However, we are in the midst of a dire economic environment, where State and 

local revenues are declining fast, especially in my home state of Michigan. According 

to estimates, state and local governments rely on revenue from telecommunications 

for about $20 billion per year. Thus, we need to look carefully at any legislation, 

including this one, that could further impact State and local revenues and a state 

or local government’s ability to provide its residents essential services. 

I look forward to today’s hearing, and hope it will achieve three critical objectives. 

First, it should serve as a venue where we examine the taxes and fees imposed 

on wireless services and providers. 

Second, this hearing should allow us to focus on H.R. 5793, which responds to concerns voiced by the wireless industry regarding what it perceives as a discriminatory burden imposed on them by State and local taxing authorities. 

Third, this hearing should serve to begin a dialogue on State and local taxation 

of communications. And I urge each state and locality to revisit, simplify, and modernize its communications tax structure in light of technological advances. 

I thank Chairwoman Sa ́nchez for holding this important hearing, and I very much 

look forward to hearing today from the witnesses. 

Mr. CANNON. And may I also apologize. We were laughing up 

here. And that is sometimes a little coarse. I just wanted to let people know that I was reading to staff the very kind remarks that 

Mr. Smith had made about me, which were kind enough to be 

laughed at. 

Thank you, folks. We appreciate the seriousness of this panel, 

and our guests here. And I want to make it clear that we were 

laughing about something other than the subject matter here. 

Thank you. 

Ms. SA ́ NCHEZ. Okay; duly noted, for the record. 

At this time, I would recognize the gentleman from Florida, Mr. 

Keller, for 5 minutes of questions. 

Mr. KELLER. Thank you, Madam Chairwoman. 

Senator Clayborne, let me start with you. How long have you 

been in the Illinois State Senate? 

Mr. CLAYBORNE. About 131⁄2 years. 

Mr. KELLER. Thirteen years—so you served with Senator 

Obama? 

Mr. CLAYBORNE. That is correct. 

Mr. KELLER. As you can tell from our questioning, it is a pretty 

bipartisan issue, at least, on the House side. Over on the Senate 

side, Senator McCain has introduced the cell-phone tax moratorium, S. 166, which he successfully got through the Commerce 

Committee. 

Have you had a chance to talk with your colleague, U.S. Senator, 

Barack Obama, to see if you can persuade him along the same 

lines as Senator McCain, on this issue? 

61 

Mr. CLAYBORNE. No. No, I have not talked to Senator Obama 

about this issue. 

Mr. KELLER. Do you have any sense of optimism that you can 

win him over? 

No? 

Ms. Mahoney, do you know where he is on this? You got him? 

Ms. MAHONEY. I would say that you will not be able to convince 

the senator on this issue. 

Mr. KELLER. All right. Okay—could have a vote present on this 

one here. 

Let me turn to you, Mr. Mackey. 

Now, I have noticed that my home state of Florida has about the 

third highest cell-phone taxes. And Virginia is sort of the middle 

of the pack—I think, around number 36. Yet, Florida sort of failed 

to pass their reform legislation to address this issue, while Virginia 

was quite successful. 

What do you attribute the two dynamics of that to? 

Mr. MACKEY. Well, I mean, I think Florida is—because you don’t 

have an income tax, it makes it that much more difficult to try to 

replace the kind of money that is on the table. 

I think, because Florida localities had, historically, been granted 

a large amount of tax autonomy, there was a—they were taxing at 

extraordinarily high rates. And so there was a lot of money that 

needed to be replaced. And, politically, they couldn’t come up 

with—they got halfway to reform. 

They made it so telecom companies don’t have to file hundreds 

or thousands of returns for local jurisdiction, and they centralized. 

But, unfortunately—and this is the problem we face everywhere— 

they were unable to get the rate down to where there is not a significant disparity. 

Mr. KELLER. All right. Well, let me ask you: You seem to think 

that these taxes have been a pretty good target for localities to increase. Why do you think they are choosing to increase the cellphone taxes by a significant amount? 

Mr. MACKEY. Well, I think some of it is a historical relic to the 

old days of regulation. I mean, the localities, because telecom companies had to use their rights of way, they had the ability to tax 

them and impose fees on them. And, then, when wireless came 

along to compete, and wireless didn’t have that same situation, 

they had already had a well-established right, if you will, to tax 

communications companies. 

And their argument was, ‘‘Reform equals ‘Let us make wireless 

pay what we have historically made the wire-line guys pay’.’’ 

Mr. KELLER. Now, Mr. Lay—and I am just paraphrasing—sort of 

says, ‘‘Well, look. If you are city councilman comes up with some 

huge tax increase that you don’t like on the cell phone, you have 

a remedy. Just vote him out.’’ Why is that not a sufficient remedy 

under your view? 

Mr. MACKEY. Well, in my opinion—and some of it gets back to 

what Mr. Cannon said. I think, a lot of times, you know, people are 

busy. And, you know, these bills come in. And, frequently, people 

don’t focus on how much tax is being imposed on the bill. 

In some respects, you know, it is a hidden tax. It is on the bill, 

but who is—people don’t always go through their bills. So I think 

62 

one of the reasons is that it is a tax that can be raised without people paying a lot of attention to it. 

Mr. KELLER. Ms. Mahoney, you are a local elected official. Would 

you have concerns if—you know, as someone sitting for election— 

if you had a big tax-increase vote on a cell-phone issue? 

Ms. MAHONEY. I would be very concerned. And one of the things 

that, you know, I have said, is that I think it is so important if— 

I mean, if we are going to level the playing field—— 

Mr. KELLER. Right. 

Ms. MAHONEY [continuing]. You know, let us level it. 

But, I mean, my fear is we start preempting these things, you 

know, and pulling people out and separating them individually— 

who is going to be before you next? 

Mr. KELLER. Right. 

Ms. MAHONEY. At the local level, for us to not have the ability 

to say to our constituents—and we have to show them how the 

money is going to be used—how we are going to use it. 

And so if I come to them and say, ‘‘Oh, we are just raising it because we are going to give the employees a raise,’’ that is totally 

different than saying, ‘‘I am not going to be able to keep the fire 

department going. I am not going to be able to, you know, keep our 

911 system going. I am not going to be able to do these things.’’ 

That is totally different. But that is the constituents that we 

speak to. And I think that is how you become elected—when you 

address the individual needs of the consumer. 

Mr. KELLER. All right. Well, thank you. 

I am sorry, Mr. Lay, I didn’t get a chance to get to you. But my 

time is expired. And I am sure my other colleagues will follow up 

with that. 

And I yield back to the balance of my time. 

Ms. SA ́ NCHEZ. The gentleman yields back. 

I really want to thank all of the witnesses for their testimony 

today, and, again, for being so patient through the interruption. 

Without objection, Members will have 5 legislative days to submit any additional written questions, which we will forward to the 

witnesses and ask that you answer as promptly as you can, so that 

we can make them a part of the record. 

Without objection, the record will remain open for 5 legislative 

days, for the submission of any other additional material. 

Again, thanks to everybody for participating in this hearing. And 

this hearing of the Subcommittee on Commercial and Administrative Law is adjourned. 

[Whereupon, at 3:30 p.m., the Subcommittee was adjourned.] 

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MAYORS, THE NATIONAL LEAGUE OF CITIES, THE GOVERNMENT FINANCE OFFICERS

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