On Taxing

With revenue scarce and financial obligations many, states and cities have begun to look at cell-phone taxes as a way to fill their depleted coffers. As the New York Times article describes them, however, the legislators' attitudes are troubling.

First, it seems vaguely sinister to target something for taxes just because there are budgetary needs to be met.

Last year, the City Council in Baltimore faced a budget shortfall so bad that it considered laying off 186 city police officers, reducing some fire department operations and scaling back trash collection. Then it found an untapped honey pot: cellphones.

"I can't remember the last time we've had such an easy budget year," said Sheila Dixon, the president of the City Council. "The bulk of our taxes come from property tax, but when you can't diversify and the federal and state taxes are drying up, you need other income."

Though I understand that taxes serve multiple functions, one of which is to provide the state with revenue, it still strikes me as rather capricious to select cellphones for taxation simply because they are around and easily taxed. Isn't there a sense that taxes are a response to a cost associated with what is to be taxed? Property taxes, for instance, are used to pay for the services and costs that are created by people living in a particular city or state. Sales taxes help pay for the wear-and-tear commerce places on the roads and environment. Utility taxes pay for the costs associated with ripping up the land to lay electrical and telephone lines. What sort of costs arise from the odd cellphone tower placed here or there (or, are there really that many?)? And why is the cost so large that a city needs to impose a 5% tax on a person's monthly cellular phone bill? And all of this is beside the point if the tax is being levied to make up budget differences that would exist regardless of whether or not cell phone exist.

I am not well versed in the theory of taxation, so I might be hopelessly wrong about all of that. However, I can--with great certainty--rebuke the skulky-attitude some legislators seem to have regarding these kinds of taxes:

Officials are particularly eager to tax cellphones because the amounts individuals pay each month are small enough to go virtually unnoticed, but in aggregate can be substantial. Cellphone subscribers nationwide paid an estimated $17.8 billion in federal, state and local taxes last year.

Virtually unnoticed? Regardless of whether one can virtually unnotice something, why are legislators taking into account the assumption that most folks won't even notice the taxes!? This is not a case where the cellphone companies are adding hidden fees in small print on the back of a bill; these are governments of the people, by the people, and for the people, sneakily slipping people this tax. I think that they shouldn't be acting like slimy snake-oil salespeople.

If this is the type of stuff that goes into their calculations, no wonder governments are (morally) bankrupt.