One Less Tax on Telecom, At Least in Texas

The Texas legislature took long overdue steps to ease some of the tax burden on consumers, voting last week to end the Telecommunications Infrastructure Fund (TIF). The TIF repeal will save Texans $200 million a year, Bill Peacock, Director of the Center for Economic Freedom at the, told me. The only remaining point to be hammered out in a House-Senate conference is whether the tax will sunset this year or in 2008. Texas Gov. Rick Perry, who supports the repeal, is expected to sign it. The Texas Public Policy Foundation notes the history of the Texas TIF in a statement applauding the legislature’s action.

The TIF was created in 1995 as a 10-year project to extend high-speed Internet infrastructure to schools, libraries, and hospitals. The TIF’s funding came from a 1.25% tax on phone bills that was to automatically expire in 2005. In 2003, the Legislature determined that the TIF’s mission was complete, but rather than canceling the tax, it transferred the funds collected into a technology allotment for public education. In 2005, the Legislature extended the tax again, depositing the proceeds into the state’s general revenue account.

In a recent survey of 59 cities for which tax data was available, Dallas and Austin ranked third and fifth in terms of highest overall telecom tax burden, according to a new report from the Heartland Institute which I co-authored. Here’s hoping the TIF repeal may help knock both cities down a few places on this dubious honor roll.