As part of Florida’s budget, Governor Scott proposed to cut the cell phone and TV tax rate by 3.6 percentage points. When approved by the Florida Legislature, the tax cut will save Floridians $470 million annually. These services are taxed at 9.17% for cell phone and cable TV and 13.17% for satellite TV services – and that is just “state” taxes. A household with monthly cell phone cost at $125 and cable or satellite service at $100 would save $97.20 per year.
This tax cut is a brave initiative because cell phone taxes are acknowledged to be one place where government likes to hide taxes. Indeed, there is much more tax than the 3.6% the Governor proposes to remove. The total tax rate on Florida’s cellular consumers totals 22.4%, including 16.6% in state and local cell phone taxes and 5.8% more in federal tax. Only 3 states have a higher tax burden on wireless consumers. For a household spending $125 on cell phones and $100 on cable each month, the annual state and local tax burden would be $585. Chopping almost $100 out of communications taxes is laudable and welcomed.
When tax reductions are planned, we need to be careful about what gets cut, as the Tax Foundation explains. When you “starve the government beast,” you must assure that the government applies its limited resources in the best interest of the taxpayers. For instance, we have seen a vindictive reaction by big government advocates in the federal spending sequesters, where essential programs such as defense were cut just as vigorously as those that most consider optional. The cuts were not applied in an optimal way. But, for Governor Scott’s plan, it appears this tax cut meets the public’s interest.
The $470 million in communications tax reduction is just one use for part of Florida’s budget surplus of $1 billion. To produce that surplus, state revenues helped and state agencies tightened their budgets eliminating $267 million in cost and 1,353 positions. Gross debt service savings of $1.25 billion helped substantially. The cellular tax cut will not require an increase debt.
Cellular services are used very widely – even at higher rates by those of low incomes – because these services are often the only telephone and Internet connection that consumers have. Wireless services give consumers access to family, employers, E-911 services, medical assistance and other essential services. Why do we tax what we should encourage?
Given the care with which the budget surplus was developed and the populist allure of a cell phone and TV tax cut, it would be a surprise if many oppose it. The plan is good for Florida’s consumers and, therefore, good public policy.
Alan Daley is a retired businessman who lives in Florida and who writes for The American Consumer Institute Center for Citizen Research, a nonprofit educational and research organization. For more information about the Institute, visit www.theamericanconsumer.org. This piece ran in the Tallahassee Democrat.