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Letter from Douglas Holtz-Eakin, Director Congressional Budget Office regarding telecommunications taxes 1 (February 2004)

handle is hein.congrec/cbo10381 and id is 1 raw text is: CONGRESSIONAL BUDGT OFFICE Douglas Holtz-Eakin., D U-.S. Congress bashinton, DC 20515 February 13, 2004 Honorable Lamar Alexander United States Senate Washington, DC 20510 Dear Senator: This letter responds to several questions you posed to CBO about state telecommunications taxes. What are the components of telecommunications taxes collected by state and local governments? How much of these revenues could be affected by the enactment of S. 150, the Internet Tax Nondiscrimination Act (ITNA)? Based on information from industry representatives, state and local governments, and federal statistical sources, CBO estimates that state and local governments currently collect more than $20 billion annually from taxes on telecommunications services. These taxes fall into two broad categories: business taxes and transactions taxes. Business taxes include property taxes, corporate income taxes, sales taxes on business inputs, and capital stock taxes. They account for about one-third of the taxes telecommunications companies pay annually (about $7 billion), and do not appear to be directly affected by S. 150 (version MGR.6). The remaining two-thirds (at least $13 billion) are known broadly as transactions taxes and include gross receipts taxes, sales and use taxes, 911 fees, state universal service fund (USF) fees, and other taxes that are levied on telecommunications transactions. Section 1107 of the Managers' Amendment to 5. 150 explicitly states that 911 taxes and USF fees would not be affected by the prohibitions in the bill. Based on information from the National Emergency Number Association (NENA), we estimate that 911 fees-which

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