REFORMING
TELECOMMUNICATIONS TAXES IN VIRGINIA:
BACKGROUND MATERIALS

Presentation of
Jeffrey A. Eisenach, Ph.D.
President, The Progress & Freedom Foundation
before the Governor's Commission on Information Technology

October 26, 1999

 

Table One:
General Fund Excise Taxes

Product

Revenue
(FY 1998, millions)

Share of On-Budget Federal Revenue

Alcohol

$7,215

0.53%

Tobacco

$5,657

0.44%

Telecommunications

$4,910

0.38%

Source: Office of Management and Budget

 

Figure One:
Telecommunications Tax Rates
1986-1998

 

Table Two:
State and Local Telecommunications Taxes

State

Local/Municipal

  • Franchise Taxes
  • Sales & Use Taxes
  • Telecommunications Excise Taxes
  • Gross Receipts Taxes
  • License Fees
  • Utility Taxes, Utility User Taxes, PUC Fees
  • Rental/Lease Taxes
  • Utility Sales Taxes
  • Business & Occupation Taxes
  • Infrastructure Maintenance Fees
  • 911 Fees, Emergency Operation Charges, 911 Database Charges, 911 Equalization Surcharge
  • Intrastate Surcharge
  • High Cost Fund Surcharge
  • Relay Service, Communications Devices Surcharges, Universal Access Charges
  • Access Line Charges
  • Infrastructure Fund Reimbursement
  • Poison Control Surcharge (TX)
  • Public Utility Commission Fees
  • Universal Service Charges, UniversalLifeline Telecommunications Surcharge
  • Franchise Taxes
  • Sales & Use Taxes
  • Local 911 Tax
  • Excise Taxes
  • Telecommunications Taxes
  • Gross Receipts Taxes
  • License Fees
  • Utility Taxes
  • Access Line Tax
  • Rental/Lease Taxes
  • Telephone Relay Surcharge/Universal Lifeline Surcharge
  • Public Service Taxes
  • Utility Users Tax
  • Infrastructure Maintenance Fees
  • Right-of-Way Charges
  • 911 Fees
  • Business & Occupation Taxes
  • Teleconnect Fund
Source: AT&T, The Progress & Freedom Foundation

 

Figure Two:
Composition of Telecom Taxes

 

Table Three:
The Impact of Telecommunications Taxes
on Broadband Penetration

Tax Rate

Impact on Penetration (Percent)

Households Denied Internet Access

Children in Households Denied Internet Access

  
  

1999

16 %

-7.5 %

0.2 million - 2.9 million

0.1 million - 1.9 million

20 %

-9.3 %

0.2 million - 3.6 million

0.1 million - 2.3 million

33 %

-18.9 %

0.4 million - 7.3 million

0.3 million - 4.8 million

  
  

2002

16 %

-7.5 %

1.2 million - 4.2 million

0.8 million - 2.7 million

20 %

-9.3 %

1.5 million - 5.2 million

1.0 million - 3.4 million

33 %

-18.9 %

3.0 million - 10.6 million

1.9 million - 6.9 million

Source: The Progress & Freedom Foundation

 

Figure Three:
Combined State and Local Telecommunications Tax Rates

 

Figure Four:
State Telecommunications Tax Rates

 

Figure Five:
Local Telecommunications Tax Rates

 

Figure Six:
Average Monthly Taxes Per Line:
Selected Virginia Jurisdictions

 

Figure Seven:
Comparison of Annual Number of Returns

 

Table Four:
Telecommunications Taxes in the Twenty Highest-Tax Cities

 

City

Tax

Amount

Rate

  • Richmond, VA

$4.85

35.7%

  • Corpus Christi, TX

$2.57

27.7%

  • Tampa, FL

$3.06

25.9%

  • Chicago, IL

$2.74

25.3%

  • Baltimore, MD

$4.15

25.1%

  • Dallas, TX

$2.63

24.9%

  • St. Louis, MO

$2.57

22.7%

  • Kansas City, MO

$2.55

22.5%

  • Brownsville, TX

$1.99

22.2%

  • Houston, TX

$2.44

21.7%

  • Los Angeles, CA

$2.43

21.6%

  • San Antonio, TX

$2.10

21.0%

  • Fort Worth, TX

$1.93

19.2%

  • Oakland, CA

$2.14

19.0%

  • Atlanta, GA

$3.31

19.0%

  • Salinas, CA

$1.97

17.5%

  • San Jose, CA

$1.85

16.5%

  • Miami, FL

$1.73

16.2%

  • Detroit, MI

$2.15

16.2%

  • Huntsville, AL

$2.48

15.2%

Weighted Average (95 Cities)

$2.04

15.7%