Universal Service Charge: A 16.1% tax on your phone bill, double excise taxation

Look at your land line, wireless phone, and cable bills. 

Do you see the "Universal Service Charge" under "government surcharges & fees". You should pay attention. This is a steep tax.

This tax is has been 17.4% of your monthly bill until 1st quarter 2013 when it dropped to 16.1%. 

The "Universal Service Charge" is a tax imposed in addition to the rather comprehensive bundle of the usual taxes: Federal excise tax, federal FCC regulatory fee, and state & local taxes. So I wondered what is a Universal Service Charge ... also called the Universal Connectivity Charge.

This falls under the Federal Communications Commission (FCC) one of the so-called 'independent regulatory commissions' reporting to both President and Congress, like the Securities and Exchange Commission (SEC) and Food & Drug Commission (FDA).



I looked it up, and here's what I found:

In breaking up Bell Telephone (into the "Baby Bells" and "AT&T") and later, in the 1996 Telecommunications Act, allowing competition in local as well as long-distance services, the Congress ended the Bell Telephone Company monopoly ... and the requirement to provide phone service to every home in America. And that created a political problem: 

Without the guarantee of cost-plus rates in a monopoly, phone companies, including those which comprised the original Bell, would not ensure phone service in areas where the cost-rate equation wasn't profitable: Rural, low-income, etc. 

So Congress formed a Federal-State Joint Board to figure out a way to ensure telecommunications  service to these otherwise unprofitable areas. The Board decided upon a list of telecommunications services that everyone had the "right" to have at "reasonable costs".

In 1997, Congress acted on the Board's report by creating the "Universal Services Fund" to subsidize services to 4 new programs: High Cost, Low Income, Rural Health Care, and Schools & Libraries.

The Universal Service Administrative Company (USAC) is a not-for-profit corporation that administers the Universal Service Fund (USF), which is mandated by the Federal Communications Commission. The USAC assists in providing telecommunication services to low income communities, rural health care providers, schools and libraries. They also ensure that high cost services are available in urban areas.

http://www.usac.org/default.aspx

The Universal Services Fund is overseen by the Federal Communications Commission (FCC) through the "Universal Services Administrative Company" an independent not-for-profit corporation set up to record the Universal Services Fees collected into "The Fund" and the disbursements from "The Fund" to the 4 programs. 

The actual collection of the money be done by each state's "Public Utilities Commission" ... based on something called the "public interest standard". The regulations also call for "appropriate communications carriers" to actually provide the 4 programs' service at these Universal Service Fund" subsidized rates.  It's based on a percentage of your phone service per line/phone and paid by carriers to the Universal Service Administrative Company quarterly.

Well, a per item tax collected by an indirect source, such as a merchant ... or phone company ... is the actual definition of an excise tax. So the Universal Service Charge is a rose by another name. The federal government charges 2 excise taxes on phones!!

Assuming that everyone is charged $3 per phone per month for the USF, the U.S. has more than 100-million households plus millions of businesses; and each household and business often have more than one phone (multiple mobile phones or 1 mobile and 1 land) the Universal Service Fund (USF) collects more than $300 million per month or more than $3.6 billion annually (probably $5+ billion). 

That's a lot of money!! And, it's just 1 of the 2 excise taxes charged on phones!! 

Personally, I object to the Universal Service Charge (or Universal Connectivity Charge) and the whole tangle of entities built around it. This should be consolidated into one of the federal cabinet departments. This should be an on-budget item. 

Furthermore, this is excessive excise taxing and it shouldn't be an off-budget tax. Why should I be assessed for me to subsidize rural residents' phone service ... or anyone's phone service?

How ironic that Congress does not see healthcare as a human right but they do see telephones as a human right. 

Whether or not you believe in the Universal Service Fund mission, you can agree that the tangle of off-budget entities is a wasteful bureaucracy that should be consolidated into a cabinet department and a hidden tax that should be discussed and handled openly.

Please, sign a petition, contact a Congressman, write a letter to the editor, or discuss this with your friends and family. That's the only way we can put this on the national agenda to take it off of the national tax rolls.

By Steven J. Reichenstein