Tiny Tax Reform
Treasury Secretary Mnuchin has discussed accomplishing comprehensive tax reform this year. I wish him and President Trump well in this endeavor, but most people won’t pay attention, let alone understand what’s involved. If the President wants an easy-to-understand win, he should consider zapping that $1 ‘Universal Connectivity Charge’ on phone bills. This was an Al Gore legacy, to get everyone connected to the Internet (which he invented, remember?).
The Clinton-era Telecommunications Act of 1996 required all telecommunications providers to pay into a ‘Universal Services Fund.’ Not surprisingly, many telecoms companies devised a simple way to do this: charge each customer a dollar a month.
If a dollar a month seems trivial, remember how, for the last twenty years or so, telecoms firms have been collecting billions of dollars for the fund.
One of the goals of the fund is to ensure rural areas have phone, and ultimately broadband service. In the past, some have questioned why telecoms firms collect the ‘charge’ monthly from all customers only to have the monies returned to them as subsidies for rural service.
Of course, all that money has built a complex bureaucracy, with an array of programs.
One such is the so-called ‘Obamaphone’ program. Under the ‘Lifeline’ program (enacted during the Reagan Administration), certain low-income consumers can obtain telecoms services at a reduced (subsidized) price. Back in the 1980s, it was covering landline services for grandma.
In 1996, Lifeline began paying for Internet and cell phone services (another Gore idea, undoubtedly). Next came coverage for broadband service, which began in 2016 – one of those things the Obama Administration had to do while its time was running out.
Lifeline doesn’t pay for phones, but if a Lifeline user signs up with a provider, there’s a good chance they’ll get a cheapo cellphone in the bargain. Back in 1996, cellphones weren’t cheap, but today they are, and voilà, we have Obamaphones.
Meanwhile out in rural America, satellite dishes pop up on every roof. Paid for by the universal ‘charge’? I expect many times the answer is yes. Broadband access: it’s so important! Nobody should miss out on being able to watch Oprah or The View.
And I wonder just how vigorously the Federal Communications Commission is investigating fraudulent program use. Although eligibility requirements were tightened last year, if a U.S.-born child of an illegal immigrant is receiving food stamps, the family’s eligible for a Lifeline subsidy.
By the way, the Universal Connectivity Charge is not a tax, technically. Just as the penalty for not signing up for Obamacare wasn’t a tax either.
No doubt, Republican Congressional members from rural areas will recoil at the idea of eliminating the one-dollar ‘charge’ (‘it’s just a buck’ they’ll say). However, it’s time for the Trump Administration to take a very hard look at program effectiveness, and if the programs are needed at all.
Simultaneously the Administration needs to end the programs’ dedicated funding stream by eliminating the ‘charge’ and letting the programs go through the normal Congressional authorization and appropriations process.
Lastly, I think President Trump would love having a photo-op where he holds up a phone bill and tells America how the days of funding Al Gore and Barack Obama’s programs via this sneaky ‘charge’ are over.
Everyone who receives a phone bill will get the message, loud and clear.