California’s Proposed Text Message Tax Targets The Poor

In a move that might possibly be enshrined in the halls of “The Worst Ideas Ever Put Forth By Government,” California’s Public Utilities Commission has put forward a proposal for a new tax on cell phone text messages. This tax would ostensibly be used to help pay for programs that provide free cell phones and service for the poor. The proposal is scheduled for a vote next month.

What’s in question is whether or not the California Public Utilities Commission actually has the authority to tax text messages. They’re relying on an interpretation from federal Communications Act of 1934 and the Telecommunications Act of 1996 to bolster their claim to be able to collect this tax to help maintain a minimum level of telecommunications service in the state. Text messaging, in their view, is a telecommunications service and, as such, subject to their purview.

CTIA, a wireless communications industry association, disagrees. They feel that texting is an information service like email and is not subject to the Public Utilities Commission’s authority. The FCC is meeting today to rule on this, and it’s expected that they will fall on the side of text messaging as an information service. It’s unlikely that President Trump’s FCC will side with California on anything, let alone something that could generate millions of dollars in tax revenue every year.

The problem with this proposal is that there are already several alternatives to traditional text messaging. Mobile apps like WhatsApp, iMessage, and Facebook Messenger use cellular data and wifi to send text messages, and account for nearly triple the 3 trillion texts sent in 2018, according to the CTIA.

The reason behind California’s Public Utilities Commission’s drive to tax text messaging is one of math. Year over year, the budget for the Commission goes up — from $670 million in 2011 to $998 million in 2017 — and year over year their revenue falls — $16.5 billion in 2011 to $11.3 billion last year. They need to make up that shortfall somewhere, and they figure text messages would be the likeliest place.

Now, it’s probable the Commission would opt for a flat monthly fee. Much like the various taxes and fees outlined in microscopic print at the bottom of your current cell phone bill, this would likely go unnoticed by most. However, the Commission’s proposal also outlines their desire to apply this charge retroactively for the past 5 years. That would cost Californians over $200 million.

Cell phone taxes and fees have been climbing in California over the past few years. In 2014, California was squarely in the middle of the pack when it came to these taxes. In four short years they have risen six spots to number 18.

And don’t forget that this is effectively a poor tax. Regressive taxes, like California’s gas and vehicle tax, disproportionately affect the working and lower classes. This program’s goal is to provide cell phones and service to the disenfranchised. Well, they may very well be creating their own market by trying to tax the main method of communication for many. The hope is that this proposal will fail, and fail spectacularly. However, the government has never been one to take a defeat lying down. I fully expect to see them try to take another bite at the apple after this proposal fizzles out.

Consumer groups should be ready to combat it when it arises again. Because it will.