In Cities Facing Budget Deficits, Cellphone Becomes a Taxpayer

Granted, in some cases taxes need to be added to offset costs. But more often than not it is just easier to tax something like mobile phone subscribers in lieu of confronting wasteful spending.

Last year, the City Council in Baltimore faced a budget shortfall so bad that it considered laying off 186 city police officers, reducing some fire department operations and scaling back trash collection. Then it found an untapped honey pot: cellphones.

Starting in August, the city began collecting $3.50 a month from each of Baltimore’s 238,000 mobile phone subscribers. The extra income has helped to strengthen the city’s finances and is expected to help the city fix up schools and trim the property tax.

“I can’t remember the last time we’ve had such an easy budget year,” said Sheila Dixon, the president of the City Council. “The bulk of our taxes come from property tax, but when you can’t diversify and the federal and state taxes are drying up, you need other income.”

Baltimore is not alone. The city of Springfield, Ore., for example, recently enacted a 5 percent tax on cellphones and land lines, which would help finance a new jail. Residents and utilities opposed to the tax, which is yet to take effect, have forced a referendum to be held on Tuesday. [Read the rest]