Here's an 18.2% Tax You May Not Even Know About!
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The FCC has just announced that the so-called surcharge that feeds the agency's Universal Service Fund ("USF") has been increased to 18.2% for the first quarter of 2016. This "surcharge"—really a tax, for all practical purposes—is applied to all long-distance and international telephone calls, including mobile calls, and is used to provide subsidies to support high-cost areas, schools and libraries, and low-income persons.
The surcharge, which has increased from just over 6% in 2001 to over 18% today supports almost $8 billion is subsidy disbursements per year. And if the FCC moves forward with its plans to expand the subsidy program to support broadband serivces (rather than just voice) for low-income persons, then the amount of annual subsidies—and the size of the USF "tax"—could increase even further.
The FCC requires the telecom providers who collect the tax to label it a fee or surcharge on consumers' telecom bills. You have to look carefully on your bill to find the amount of the surcharge you're paying.
As my colleague Seth Cooper explains in a new blog post, "FCC Hits Consumers With New Year's USF Tax Hike," the whole USF subsidy program is problematic "because the rate is assessed and the money is collected and spent outside the control and accountability of Congress." This is a way, "dodging the constitutional maxim of 'no taxation without representation.'"
There is much more about the operation of the USF program, and its history, in Seth Cooper's blog.