California Regulators Drop Plan to Tax Texts

GOP-funded 'stop the text tax' petition gathered 200,000 signatures in 3 days

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December 18, 2018

California Republicans are celebrating a rare political win in the state after regulators abandoned a plan to tax text messages.

The California Public Utilities Commission on Monday withdrew a proposal to levy a tax on text messaging plans, citing last week's ruling by the Federal Communications Commission (FCC) that dealt the plan a blow.

In a ruling meant to protect consumers from text-messaging spam, the FCC determined that text messages are an information service, not a telecommunications service. That decision placed text services outside of the jurisdiction of state regulators.

Carl DeMaio, a conservative radio host who spearheaded the unsuccessful state ballot initiative to repeal the latest gas-tax increase, said the backlash across the state, especially among tech savvy millennials, about the invasive new tax proposal killed the plan before it got off the ground.

A "Stop the Text Tax" petition that DeMaio circulated garnered 200,000 signatures in 72 hours, he said.

DeMaio's group, Reform California, quickly mobilized against the text tax, circulating the petition, reaching out to media to denounce it and placing an unspecified digital ad buy.

"After an outpouring of public outrage, the crazy text tax proposal from Sacramento politicians was withdrawn—for now," DeMaio emailed supporters. "A rare success for California taxpayers!"

Because the California Public Utilities Commission, or CPUC, only tabled the idea, which was set to be taken up in its early January meeting, DeMaio told opponents of the tax idea to continue circulating the petition with friends.

"While we celebrate, we know it is only a matter of time before they cook up another crazy and extreme tax hike – and we'll be ready to fight it with your help!" he emailed.

The Bay Area Council, the California Chamber of Commerce, and the Silicon Valley Leadership Group all were fighting the new tax, estimated to cost $44.5 million a year, although some worried that regulators would want to apply the tax retroactively for five years, amounting to a $220 million bill on consumers.

Industry groups, including the CTIA, which represents AT&T Mobility, Spring, and T-Mobile, also were lobbying against it, arguing that it put them at a competitive disadvantage to other messaging services including WhatsApp, iMessage, and Skype.

In a legal filing, CTIA dubbed the proposal "illogical, anti-competitive, and harmful to consumers."

The CPUC announced the withdrawal of the text tax plan in a Monday tweet, noting that last week's FCC decision "limits state authority over information services."

"Prior to this ruling, text messaging was not a classified service under federal law," the agency said. CPUC Commissioner Carla Peterman withdrew the text tax proposal in "light of the FCC's action," the tweet said.

The tax would not have been applied to each text but instead as a flat surcharge line at the bottom of wireless phone bills. The CPUC said the tax would support the Public Purpose Program, which is designed to assist low-income, deaf, and disabled customers and is experiencing a severe budget shortfall.

Before tabling the idea, a CPUC spokeswoman argued that it wasn't a completely new tax but an extension of an existing surcharge on all wireless phone services.

Most cell phone plans bundle services together and charge a single monthly price. A portion of that price is attributed to text messaging for those carriers that assess the surcharge on text messaging, she said.

"For other providers, the surcharge on text messaging would be new, but could be balanced out if a customer pays less in surcharges on voice calls that today are subject to surcharge," she said.

Regardless, she said the current surcharge rate is less than 7 percent, "so for every $10 of text revenues, it would cost [consumers] about 70 cents."

Published under: California , Taxes