Skip to main content

Why you pay hidden cell phone tax

By Edward J. McCaffery, Special to CNN
August 21, 2013 -- Updated 1611 GMT (0011 HKT)
STORY HIGHLIGHTS
  • President Obama's plan to fund ConnectEd is to charge cell phone users
  • Edward McCaffery: The middle class is being gouged to pay for programs for all
  • He says Obama's proposed increase in cell phone fees is hidden as a "charge"
  • McCaffery: Why not ask wealthy Americans to pay disproportionately more for it?

Editor's note: Edward J. McCaffery is Robert C. Packard Trustee Chair in law and a professor of law, economics and political science at the University of Southern California. He is the author of "Fair Not Flat: How to Make the Tax System Better and Simpler."

(CNN) -- President Obama has proposed expanding high-speed Internet access in public schools across the country. That seems like an obviously good idea, to me and probably to you too.

But of course, there is a rub: money.

The initiative is expected to cost $4 to $6 billion. The federal government is hardly flush with cash these days. How then will it pay the price of doing something good? The president is suggesting that the Federal Communications Commission raise the charges on cell phone users -- that is, basically, all of us (there are today more cell phones than people in the United States) -- by $4 a year for the next three years.

Edward J. McCaffery
Edward J. McCaffery

That is small change, to be sure, in a world of trillion dollar deficits. Who among us would begrudge today's youth better Internet access for a penny or so a day?

And that may well be the "right" answer, from a moral and public policy perspective. But it is still worth pausing to make an important bigger point. We see here the same old deal with the devil that our government has been making for decades now.

Liberals like President Obama propose doing something good -- better Internet access for all today, health insurance for all Americans some days back. But, heaven forbid, we cannot ask wealthy Americans to pay disproportionately for the change. Indeed, we cannot even touch the income tax -- the one major American tax that at least pretends to be progressive -- to pay for any new social wants and needs at all.

The fact is that the changes we made to the income tax in the American Taxpayer Relief Act of 2012 -- the "fiscal cliff" fix deal from the wee early days of 2013 that raised the marginal rate on married couples earning more than $450,000 a year (yes, $450,000 a year) back to its 2001 level of 39.6%, and so on -- are supposed to be permanent.

Even if "permanent" means something like a wedding vow in my home state of California -- a year or two? -- it is clearly too early to revisit that political hot potato. Raising tax rates on the rich is a once-a-decade affair at best. Raising taxes on the middle class has become more like our daily bread.

All of the 2013 changes to the income and other taxes -- such as the gift and estate tax, which was "permanently" made largely irrelevant for 99.7% of Americans -- brought in far less revenue to the government than the expiration of the "payroll tax holiday." This latter change happened quietly, without need for any congressional action, as with the proposed mobile phone fee. As a bottom line, payroll taxes on all wage earners increased by 2% of earnings up to approximately $110,000. The social security "contribution" -- not labeled a tax, mind you -- thereby went up by as much as $4000 for a married couple. We're talking over $10 a day, now. This politically well hidden tax increase brought in almost twice as much revenue to Uncle Sam as all other 2013 changes combined.

And so the fundamental things continue to apply as time goes by -- it is the middle class that pays, and the more hidden the "surcharges," "user fees," "contributions" and so on, the better.

Back to the episode du jour. Obama's proposed increase in mobile phone fees is especially well hidden, as a "charge" that the FCC alone can impose, without congressional action, on account of the "Gore tax" from 1996, whereby then-Vice President Al Gore helped give the FCC this power.

Obama's proposal continues a trend of various forms of "excise" and user taxes -- on cigarettes, gasoline, alcohol, and telephone use, on both state and federal levels -- that is rising and accelerating. Obama was unable to deliver on his campaign pledge to raise income taxes in his first term, but he did raise federal cigarette taxes, for example, by 64 cents a pack in 2009, to just over a dollar, and he recently proposed nearly doubling that level. Meantime, there are already 17% worth of various taxes and users fees on cell phones, which the new proposal would only increase.

States and localities have been raising sales taxes for years now. No one who follows government or tax policy will be shocked if we one day, likely sooner rather than later, get a national sales or "value-added" tax (VAT) to ... well, to fund all the good that government does.

Now I happen to be a liberal who supports all this government good. But I am also a tax lawyer and professor who see the reality of the new class warfare in the U.S. Here's that reality: The middle class is being gouged to pay for programs for all, including the poor. That may all be fine and good, until one day we realize that you cannot keep getting blood from a stone, and the middle class becomes poor, too.

Then we will be left with only the rich to ask for a fair share -- unless, of course, the rich have gotten ahead of the curve, and are no longer hanging around in America for the asking. But they wouldn't do that, now, would they?

Follow @CNNOpinion on Twitter.

Join us at Facebook/CNNOpinion.

The opinions expressed in this commentary are solely those of Edward J. McCaffery.

ADVERTISEMENT
Part of complete coverage on
October 21, 2014 -- Updated 2006 GMT (0406 HKT)
Timothy Stanley says Lewinsky is shamelessly playing the victim in her affair with Bill Clinton, humiliating Hillary Clinton again and aiding her critics
October 21, 2014 -- Updated 0102 GMT (0902 HKT)
Imagine being rescued from modern slavery, only to be charged with a crime, writes John Sutter
October 21, 2014 -- Updated 1600 GMT (0000 HKT)
Tidal flooding used to be a relatively rare occurrence along the East Coast. Not anymore, write Melanie Fitzpatrick and Erika Spanger-Siegfried.
October 21, 2014 -- Updated 1135 GMT (1935 HKT)
Carol Costello says activists, writers, politicians have begun discussing their abortions. But will that new approach make a difference on an old battleground?
October 21, 2014 -- Updated 1312 GMT (2112 HKT)
Sigrid Fry-Revere says the National Organ Transplant Act has caused more Americans to die waiting for an organ than died in both World Wars, Korea, Vietnam, Afghanistan and Iraq
October 21, 2014 -- Updated 1851 GMT (0251 HKT)
Crystal Wright says racist remarks like those made by black Republican actress Stacey Dash do nothing to get blacks to join the GOP
October 21, 2014 -- Updated 2207 GMT (0607 HKT)
Mel Robbins says by telling her story, Monica Lewinsky offers a lesson in confronting humiliating mistakes while keeping her head held high
October 20, 2014 -- Updated 1329 GMT (2129 HKT)
Cornell Belcher says the story of the "tea party wave" in 2010 was bogus; it was an election determined by ebbing Democratic turnout
October 20, 2014 -- Updated 2012 GMT (0412 HKT)
Les Abend says pilots want protocols, preparation and checklists for all contingencies; at the moment, controlling a deadly disease is out of their comfort zone
October 20, 2014 -- Updated 0336 GMT (1136 HKT)
David Weinberger says an online controversy that snowballed from a misogynist attack by gamers into a culture war is a preview of the way news is handled in a world of hashtag-fueled scandal
October 20, 2014 -- Updated 1223 GMT (2023 HKT)
Julian Zelizer says Paul Krugman makes some good points in his defense of President Obama but is premature in calling him one of the most successful presidents.
October 20, 2014 -- Updated 0221 GMT (1021 HKT)
Conservatives can't bash and slash government and then suddenly act surprised if government isn't there when we need it, writes Sally Kohn
October 22, 2014 -- Updated 1205 GMT (2005 HKT)
ISIS is looking to take over a good chunk of the Middle East -- if not the entire Muslim world, write Peter Bergen and Emily Schneider.
October 20, 2014 -- Updated 1300 GMT (2100 HKT)
The world's response to Ebola is its own sort of tragedy, writes John Sutter
October 17, 2014 -- Updated 2033 GMT (0433 HKT)
Hidden away in Russian orphanages are thousands of children with disabilities who aren't orphans, whose harmful treatment has long been hidden from public view, writes Andrea Mazzarino
October 18, 2014 -- Updated 1722 GMT (0122 HKT)
When you hear "trick or treat" this year, think "nudge," writes John Bare
October 18, 2014 -- Updated 0442 GMT (1242 HKT)
The more than 200 kidnapped Nigerian schoolgirls have become pawns in a larger drama, writes Richard Joseph.
October 17, 2014 -- Updated 1345 GMT (2145 HKT)
Peggy Drexler said Amal Alamuddin was accused of buying into the patriarchy when she changed her name to Clooney. But that was her choice.
October 16, 2014 -- Updated 2043 GMT (0443 HKT)
Ford Vox says the CDC's Thomas Frieden is a good man with a stellar resume who has shown he lacks the unique talents and vision needed to confront the Ebola crisis
October 18, 2014 -- Updated 0858 GMT (1658 HKT)
How can such a numerically small force as ISIS take control of vast swathes of Syria and Iraq?
October 17, 2014 -- Updated 1342 GMT (2142 HKT)
How big a threat do foreign fighters in Syria and Iraq pose to the West? It's a question that has been much on the mind of policymakers and commentators.
October 17, 2014 -- Updated 1221 GMT (2021 HKT)
More than a quarter-million American women served honorably in the Iraq and Afghanistan wars. Now they are home, we have an obligation to help them transition back to civilian life.
October 16, 2014 -- Updated 2027 GMT (0427 HKT)
Paul Begala says Rick Scott's deeply weird refusal to begin a debate because rival Charlie Crist had a fan under his podium spells disaster for the Florida governor--delighting Crist
October 16, 2014 -- Updated 0407 GMT (1207 HKT)
The longer we wait to engage on Ebola, the more limited our options will become, says Marco Rubio.
October 15, 2014 -- Updated 1153 GMT (1953 HKT)
Democratic candidates who run from President Obama in red states where he is unpopular are making a big mistake, says Donna Brazile
October 16, 2014 -- Updated 0429 GMT (1229 HKT)
At some 7 billion people, the world can sometimes seem like a crowded place. But if the latest estimates are to be believed, then in less than a century it is going to feel even more so -- about 50% more crowded, says Evan Fraser
October 20, 2014 -- Updated 1653 GMT (0053 HKT)
Paul Callan says the Ebola situation is pointing up the need for better leadership
October 15, 2014 -- Updated 2245 GMT (0645 HKT)
Nurses are the unsung heroes of the Ebola outbreak. Yet, there are troubling signs we're failing them, says John Sutter
October 15, 2014 -- Updated 1700 GMT (0100 HKT)
Dean Obeidallah says it's a mistake to give up a business name you've invested energy in, just because of a new terrorist group
October 15, 2014 -- Updated 2301 GMT (0701 HKT)
Fear of Ebola is contagious, writes Mel Robbins; but it's time to put the disease in perspective
October 14, 2014 -- Updated 1744 GMT (0144 HKT)
Oliver Kershaw says that if Big Tobacco is given monopoly of e-cigarette products, public health will suffer.
October 18, 2014 -- Updated 1335 GMT (2135 HKT)
Stop thinking your job will make you happy.
October 15, 2014 -- Updated 0208 GMT (1008 HKT)
Ruben Navarrette says it's time to deal with another scandal involving the Secret Service — one that leads directly into the White House.
October 14, 2014 -- Updated 1125 GMT (1925 HKT)
Americans who choose to fight for militant groups or support them are young and likely to be active in jihadist social media, says Peter Bergen
October 13, 2014 -- Updated 1303 GMT (2103 HKT)
Stephanie Coontz says 11 years ago only one state allowed same sex marriage. Soon, some 60% of Americans will live where gays can marry. How did attitudes change so quickly?
October 14, 2014 -- Updated 2004 GMT (0404 HKT)
Legalizing assisted suicide seems acceptable when focusing on individuals. But such laws would put many at risk of immense harm, writes Marilyn Golden.
October 13, 2014 -- Updated 1307 GMT (2107 HKT)
Julian Zelizer says the issues are huge, but both parties are wrestling with problems that alienate voters
October 13, 2014 -- Updated 2250 GMT (0650 HKT)
Mel Robbins says the town's school chief was right to cancel the season, but that's just the beginning of what needs to be done
October 11, 2014 -- Updated 1543 GMT (2343 HKT)
He didn't discover that the world was round, David Perry writes. So what did he do?
ADVERTISEMENT