Verizon, AT&T Win House Vote to Prevent New Taxes on Wireless

The U.S. House voted to bar new state and local taxes on wireless services, approving a bill backed by Verizon Communications Inc. (VZ) and AT&T Inc. (T) and opposed by cash- strapped cities.

The Wireless Tax Fairness Act, sponsored by Representative Zoe Lofgren, a California Democrat, passed on a voice vote. The bill calls for a five-year prohibition on taxes solely aimed at wireless services, providers or property such as cell phones.

Similar Senate legislation has 12 sponsors and no hearing date after wireless tax moratorium proposals died in two sessions of Congress. Wireless companies argue that new taxes would crimp demand for services, while cities and states counter that they need to make up for falling tax revenue.

Today’s vote is “a crucial step toward providing wireless subscribers with some much-needed relief,” Steve Largent, president of CTIA-The Wireless Association, said in an e-mailed statement. The trade group includes Verizon, AT&T, Sprint Nextel Corp. (S) and T-Mobile USA Inc.

Lofgren in a statement said she is hopeful the Senate passes its version. “We need to encourage the development and adoption of wireless broadband,” Lofgren said in the statement. Wireless customers pay an average 16.3 percent in taxes and fees, compared with the average rate of 7.4 percent for other goods and services, Lofgren said.

Six organizations including the National League of Cities, the National Association of Counties and the United States Conference of Mayors said in an Oct. 27 letter to members of Congress that the bill is “an unwarranted federal intrusion” that comes “at a time when most jurisdictions are facing severe budget shortfalls.”

‘Populist Appeal’

Lars Etzkorn, a program director at the Washington-based League of Cities, said in an interview yesterday that “this bill is about special treatment and favoritism for a wireless industry that continues to experience explosive growth.”

U.S. cities are cutting staff and construction projects as “the persistent effects of the economic downturn” takes its toll, the League of Cities said in a Sept. 27 report. General city revenues are falling for a fifth straight year, with further declines probable in 2012, the study found.

“Wireless tax moratorium legislation should fare well in the Senate,” Jeffrey Silva, a Washington-based analyst with Medley Global Advisors, said in an e-mail. “The measure has a populist appeal, given that nearly every American has a cell phone.”

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

To contact the editor responsible for this story: Michael Shepard at mshepard7@bloomberg.net

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