Obama Seeks to Unilaterally Raise Taxes for Program that Has $5 Billion of Unused Funds

August 23, 2013 - 12:49 PM

The Obama administration wants to unilaterally raise taxes on phone bills nationwide, bypassing Congress.  As White House Spokesman Josh Earnest put it:

"Unfortunately, we haven't seen a lot of action in Congress, so the President has advocated an administrative, unilateral action to get this done.  We're not going to wait for Congress to act."

The increased tax would go to a government-run program called E-Rate, which was ostensibly designed to connect low-income schools to high-speed Internet. Internet access is important for student success, but before the administration rushes to throw money to another federal program, it should assess how that program is working.

Schools applying for E-Rate subsidies run into a number of barriers that lead to delays in distributing funds and connecting schools.  Delays date back to 2010 for initial requests and 2003 for appeals. Students attending a school when the application was first submitted may never benefit from high-speed Internet access.

Because of the cumbersome application process for these subsidies, there is over $5 billion sitting in the E-Rate account collected through American tax dollars and not used.

Some in the Obama administration claim their tax proposal is a three year short-term increase and would amount to about $12 dollars a year, attempting to say it is not that much money and that people won't even notice it.  History tells us that once a tax is levied it is very hard to get rid of it.  Plus cell phones are one of the highest taxed consumer products out there. The average tax rate on a monthly cell phone bill is 17 percent.  Not to mention that cell phones are one of the primary ways that Americans access the Internet.

The Obama administration has no qualms about using any strategy to raise taxes on all Americans.  The tax would hit the middle class and the low income families it is purported to help. Plus, the president is advocating that the Federal Communications Commission raise fess through administrative fiat.  When the FCC, or any administrative agency, raises fees without Congressional direction and then doles out the cash, it amounts to taxation without representation.  The American people do not vote for agency bureaucrats.  They are appointed by the President.

In reality the E-Rate program is wholly unnecessary.  There are free market programs connecting low-income households much more efficiently and at no cost to taxpayers. To take just one example, Comcast's Internet Essentials program has connected more than 900,000 low-income Americans in just under two years to low cost high-speed Internet.