Skip to main content

Why you pay hidden cell phone tax

By Edward J. McCaffery, Special to CNN
updated 12:11 PM EDT, Wed August 21, 2013
STORY HIGHLIGHTS
  • President Obama's plan to fund ConnectEd is to charge cell phone users
  • Edward McCaffery: The middle class is being gouged to pay for programs for all
  • He says Obama's proposed increase in cell phone fees is hidden as a "charge"
  • McCaffery: Why not ask wealthy Americans to pay disproportionately more for it?

Editor's note: Edward J. McCaffery is Robert C. Packard Trustee Chair in law and a professor of law, economics and political science at the University of Southern California. He is the author of "Fair Not Flat: How to Make the Tax System Better and Simpler."

(CNN) -- President Obama has proposed expanding high-speed Internet access in public schools across the country. That seems like an obviously good idea, to me and probably to you too.

But of course, there is a rub: money.

The initiative is expected to cost $4 to $6 billion. The federal government is hardly flush with cash these days. How then will it pay the price of doing something good? The president is suggesting that the Federal Communications Commission raise the charges on cell phone users -- that is, basically, all of us (there are today more cell phones than people in the United States) -- by $4 a year for the next three years.

Edward J. McCaffery
Edward J. McCaffery

That is small change, to be sure, in a world of trillion dollar deficits. Who among us would begrudge today's youth better Internet access for a penny or so a day?

And that may well be the "right" answer, from a moral and public policy perspective. But it is still worth pausing to make an important bigger point. We see here the same old deal with the devil that our government has been making for decades now.

Liberals like President Obama propose doing something good -- better Internet access for all today, health insurance for all Americans some days back. But, heaven forbid, we cannot ask wealthy Americans to pay disproportionately for the change. Indeed, we cannot even touch the income tax -- the one major American tax that at least pretends to be progressive -- to pay for any new social wants and needs at all.

The fact is that the changes we made to the income tax in the American Taxpayer Relief Act of 2012 -- the "fiscal cliff" fix deal from the wee early days of 2013 that raised the marginal rate on married couples earning more than $450,000 a year (yes, $450,000 a year) back to its 2001 level of 39.6%, and so on -- are supposed to be permanent.

Even if "permanent" means something like a wedding vow in my home state of California -- a year or two? -- it is clearly too early to revisit that political hot potato. Raising tax rates on the rich is a once-a-decade affair at best. Raising taxes on the middle class has become more like our daily bread.

All of the 2013 changes to the income and other taxes -- such as the gift and estate tax, which was "permanently" made largely irrelevant for 99.7% of Americans -- brought in far less revenue to the government than the expiration of the "payroll tax holiday." This latter change happened quietly, without need for any congressional action, as with the proposed mobile phone fee. As a bottom line, payroll taxes on all wage earners increased by 2% of earnings up to approximately $110,000. The social security "contribution" -- not labeled a tax, mind you -- thereby went up by as much as $4000 for a married couple. We're talking over $10 a day, now. This politically well hidden tax increase brought in almost twice as much revenue to Uncle Sam as all other 2013 changes combined.

And so the fundamental things continue to apply as time goes by -- it is the middle class that pays, and the more hidden the "surcharges," "user fees," "contributions" and so on, the better.

Back to the episode du jour. Obama's proposed increase in mobile phone fees is especially well hidden, as a "charge" that the FCC alone can impose, without congressional action, on account of the "Gore tax" from 1996, whereby then-Vice President Al Gore helped give the FCC this power.

Obama's proposal continues a trend of various forms of "excise" and user taxes -- on cigarettes, gasoline, alcohol, and telephone use, on both state and federal levels -- that is rising and accelerating. Obama was unable to deliver on his campaign pledge to raise income taxes in his first term, but he did raise federal cigarette taxes, for example, by 64 cents a pack in 2009, to just over a dollar, and he recently proposed nearly doubling that level. Meantime, there are already 17% worth of various taxes and users fees on cell phones, which the new proposal would only increase.

States and localities have been raising sales taxes for years now. No one who follows government or tax policy will be shocked if we one day, likely sooner rather than later, get a national sales or "value-added" tax (VAT) to ... well, to fund all the good that government does.

Now I happen to be a liberal who supports all this government good. But I am also a tax lawyer and professor who see the reality of the new class warfare in the U.S. Here's that reality: The middle class is being gouged to pay for programs for all, including the poor. That may all be fine and good, until one day we realize that you cannot keep getting blood from a stone, and the middle class becomes poor, too.

Then we will be left with only the rich to ask for a fair share -- unless, of course, the rich have gotten ahead of the curve, and are no longer hanging around in America for the asking. But they wouldn't do that, now, would they?

Follow @CNNOpinion on Twitter.

Join us at Facebook/CNNOpinion.

The opinions expressed in this commentary are solely those of Edward J. McCaffery.

ADVERTISEMENT
Part of complete coverage on
updated 6:47 PM EDT, Tue April 22, 2014
Q & A with artist Rachel Sussman on her new book of photographs, "The Oldest Living Things in the World."
updated 3:58 PM EDT, Tue April 22, 2014
Martin Blaser says the overuse of antibiotics threatens to deplete our bodies of "good" microbes, leaving us vulnerable to an unstoppable plague--an "antibiotic winter"
updated 1:37 PM EDT, Tue April 22, 2014
John Sutter asks: Is it possible to eat meat in modern-day America and consider yourself an environmentalist without being a hypocrite?
updated 11:38 AM EDT, Tue April 22, 2014
Sally Kohn notes that Meb Keflezighi rightly was called an American after he won the Boston Marathon, but his status in the U.S. once was questioned
updated 8:56 AM EDT, Tue April 22, 2014
Denis Hayes and Scott Denman say on this Earth Day, the dawn of the Solar Age is already upon us and the Atomic Age of nuclear power is in decline
updated 4:36 PM EDT, Mon April 21, 2014
Retired Coast Guard officer James Loy says a ship captain bears huge responsibility.
updated 1:08 PM EDT, Mon April 21, 2014
Peter Bergen says the latest strikes are part of an aggressive U.S. effort to target militants, including a bomb maker
updated 9:45 AM EDT, Mon April 21, 2014
Cynthia Lummis and Peter Welch say 16 agencies carry out national intelligence, and their budgets are top secret. We need to know how they are spending our money.
updated 8:35 AM EDT, Mon April 21, 2014
Julian Zelizer says President Obama knows more than anyone that he has much at stake in the midterm elections.
updated 8:55 AM EDT, Tue April 22, 2014
Eric Sanderson says if you really want to strike a blow for the environment--and your health--this Earth Day, work to get cars out of cities and create transportation alternatives
updated 10:08 AM EDT, Mon April 21, 2014
Bruce Barcott looks at the dramatic differences in marijuana laws in Colorado and Louisiana
updated 4:47 PM EDT, Fri April 18, 2014
Jim Bell says NASA's latest discovery supports the notion that habitable worlds are probably common in the galaxy.
updated 2:17 PM EDT, Fri April 18, 2014
Jay Parini says even the Gospels skip the actual Resurrection and are sketchy on the appearances that followed.
updated 1:52 PM EDT, Fri April 18, 2014
Graham Allison says if an unchecked and emboldened Russia foments conflict in a nation like Latvia, a NATO member, the West would have to defend it.
updated 9:11 AM EDT, Fri April 18, 2014
John Sutter: Bad news, guys -- the pangolin we adopted is missing.
updated 2:25 PM EDT, Mon April 21, 2014
Ben Wildavsky says we need a better way to determine whether colleges are turning out graduates with superior education and abilities.
updated 6:26 AM EDT, Fri April 18, 2014
Charles Maclin, program manager working on the search and recovery of Malaysia Flight 370, explains how it works.
updated 8:50 AM EDT, Fri April 18, 2014
Jill Koyama says Michael Bloomberg is right to tackle gun violence, but we need to go beyond piecemeal state legislation.
updated 2:45 PM EDT, Thu April 17, 2014
Michael Bloomberg and Shannon Watts say Americans are ready for sensible gun laws, but politicians are cowed by the NRA. Everytown for Gun Safety will prove the NRA is not that powerful.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT