Tuesday, June 03, 2003

Tax Policy: Universal Service Charges

The Washington Times has an excellent report today on the Universal Service charge, an omnipresent yet little-noticed sales tax on long-distance telephone calls and other telecommunications services. Just about everyone pays a Universal Service charge of some kind, often just a few dollars per month. But what is this charge for? The Times explains:

It covers the high cost of making it possible for Americans to reach out and touch someone from mountains, swamps and other remote areas. It subsidizes phone bills for poor people and technology at schools and libraries.

Technically, Universal Service charges are paid by telecommunications companies, but most of them pass the cost along to their customers via the monthly fee. But the current system is weakening, according to the Times, because people are simply using less long-distance service (the e-mail effect) and newer services, such as cable modems, aren't liable for the charges. The FCC is expected to review the Universal Service rules next year, and it may allow companies to assess their customers a flat fee regardless of actual services used.

That would be egalitarianism on top of egalitarianism. The Universal Service program already punishes individuals living in high-population areas to subsidize those who live in low-population areas. A flat fee would simply make the things more regressive by forcing people who make fewer calls a month to subsidize those who make more. Of course, the entire program should be abolished, but given the number of congressmen who come from rural states, that's unlikely to happen anytime soon.

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