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Efforts under way to reduce cell phone taxes

| Wednesday, June 29, 2005

Pennsylvania's 5 percent tax on cellular phone service got relatively little attention when it was adopted at the end of a bitter, six-month state budget impasse in December 2003.

Momentum has built since then to repeal the tax that wireless companies and advocacy groups consider part of a double whammy on consumers. Now, with state legislators trying to prepare a balanced budget by the end of the week, the issue has moved into the spotlight.

"Our goal is to have a repeal of this included as a part of the overall budget presented to the governor," said Christi McGee, director of grass roots advocacy for MyWireless.org, a Washington, D.C-based advocacy group formed in March and funded by the wireless industry.

MyWireless.org announced a statewide push this week to end the gross receipts tax on wireless service, which tacks 5 percent onto the service package cost in each month's bill. Customers also pay 6 percent or more in sales taxes.

Consumers using the MyWireless.org Web site have sent about 40,000 messages to Gov. Ed Rendell and state legislators in the month or so that the organization has been campaigning against the tax, McGee said.

The war is being fought on other fronts. State Sen. Robert C. Wonderling, R-Montgomery County, and state Rep. Mario M. Scavello, R-Monroe County, sponsored bills calling for a repeal and claim support from more than 90 other legislators. And cell phone companies including Verizon Wireless have stepped up their lobbying efforts.

Many people these days see cell phones as a necessity. But the carrier, with 45 million customers nationwide, maintains that for most consumers, they still are a discretionary purchase -- and one that competes with other electronic devices and entertainment forms for part of the household budget.

"The consumer has a certain amount of money to spend, and when our service is being taxed more than others we think that affects our ability to grow," said Annabelle Canning, assistant general counsel on tax policy for Verizon Wireless.

Pennsylvania's cell phone taxes are the eighth-highest in the country. Customers statewide pay roughly 13.57 percent in state and local taxes, and another 5.48 percent in federal taxes for a total 19.05 percent, according to CTIA-The Wireless Association, an industry trade group that supports MyWireless.org and other tax-lowering efforts.

Rates in Allegheny and Philadephia counties are higher, 14.07 percent, because they have a 1 percent sales tax add-on.

Pennsylvania's tax applies to basic monthly service for calls and text messages, she said, not special purchases such as downloading a game. Federal law prohibits taxing Internet access, so Blackberry users, for example, wouldn't pay tax on the service that allows them to send and receive e-mails.

Wonderling voted against the tax in 2003 and has worked since then to repeal it, saying the state's $400 million surplus provides enough of a cushion to make up for lost revenue.

Still, with efforts under way to slash several business-related taxes, the wireless gross receipts tax may not be in any real danger anytime soon.

Kate Phillips, spokeswoman for Rendell, said her office hasn't received a significant number of calls or letters about it. While conservative legislators have talked about a repeal, "The governor's concern is that there's no proposal to replace the revenue it creates."

Annual proceeds from the tax are about $225 million, according to the state Department of Revenue.

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