Question: The Federal Communications Commission last week increased what Republicans call "the Gore tax," the universal service charge phone companies levy on consumers so the companies, in turn, can pay for Internet access at public schools and public libraries. Is this a wise way to finance universal Web access?Josette Shiner: The goals of the FCC and Vice President Al Gore are laudable: to ensure that American schoolchildren and the American public have access to the tools of our growing information economy. But setting up a new government bureaucracy funded by a hidden tax is the wrong way to do it.
The so-called "e-rate" is the FCC's response to the Telecommunications Act of 1996 that would have set discounted telecommunications rates for schools and libraries around the country. Instead of fixing special service rates for these institutions, the FCC, with Gore's backing, levied a tax on telecommunications firms, which plan to recoup the cost by passing the charge to customers. This "fee" is hidden because it is not itemized on phone bills. The increase raises the long-distance rates of American consumers by $10 billion over four years.
The tax sets an alarming precedent in which unelected federal bureaucrats tax American corporations without the consent of the House of Representatives, the only body the Constitution gives the authority to tax. To date, the tax has generated well over $1.66 billion and generated a new bureaucracy, the Schools and Libraries Corporation (SLC). According to Americans for Tax Reform, the SLC has spent only 4 percent of the money collected on expanding Internet access to schools and libraries. Most of the rest has found its way into a bureaucratic black hole.
The federal government is behind the curve anyway: According to the Statistical Abstract, 75 percent of America's elementary schools already have Internet access; almost 90 percent of our secondary schools do. In other words, the new economy, generous and creative technology firms and the free market are doing their jobs: Kids are linked to the high-tech world more than ever. This will keep happening, in a more and more creative and productive way, without the help of Washington. Congress should pass HR692, the E-Rate Termination Act, which would cancel the FCC's hidden tax on consumers.
Bonnie Erbe: Like my colleague, I despise all tax hikes but find the nature of this one to be A) more critical to America's future economic success, and B) less venally implemented than she.
To begin with, if the surcharge were implemented "secretly," then it was about as closely held a secret as the answer to the question, "What is Rosebud?" The tax was widely covered in the media and widely protested by some Republicans. As to her claim federal agencies never implement or raise "user fees" or so-called hidden taxes, they do it all the time in the form of entrance fees to federal parks, permits for hunting or grazing on federal lands and the like.
As to the substance of her opposition to the tax: America is in the midst of a record economic boom period, brought about in large part by information technology. If we want to maintain our leadership in the information-oriented global market, we need every American up to speed on the Internet. Recent data show about half of American homes now possess computers, and a large percentage of those are online.
But that also means more than half of Americans do not access the Web (at least at home). For indigent children, the only hope of becoming computer -- and Internet -- savvy is in public school.
Inner-city schools are already plagued with financial and structural problems (declining tax bases, leaky ceilings). The last thing they need is an additional expense of $1,000 per classroom per year to buy, maintain and upgrade online computers. Each $1 billion raised in long-distance user fees costs the average American family $10. If, as my colleague claims, the e-rate will raise $10 billion over four years, we are talking a total $25 per year per family.
This is one small tax I'm happy to pay. In the long run it means I'm contributing to America's continued dominance as the world leader in the information age.
Bonnie Erbe is host of the PBS program "To the Contrary." Josette Shiner is president of Empower America.