President Obama's proposed $5 tax on cell phones to expand an existing effort to increase Internet speeds throughout schools may seem innocuous, but it could decrease spending on mobile technology, especially among small businesses.
I seem to have this conversation with my wife (and kids) on a regular basis, and I bet I am not the only one. There is only so much money that is coming in. When it’s gone, it’s gone. So, when less comes in, we have to make choices, decisions, prioritize our spending. Do I fix my own sprinklers or call a service guy? Do I mow my own lawn or call a landscaper? For some reason, all the cut backs end up meaning more work for me and the LA fitness membership seems to stay. But I’m sure that is unique to my family—not.
The point is that every household is a business and responsible people have to budget and make tough purchasing decisions. Any inflation—whether it is on meat, milk or gas—cuts into spending somewhere else.
That is why the latest news that President Obama is seeking to levy a new tax on cell phones is a bad idea. It’s a bad idea for consumers. It’s a bad idea for businesses. It’s a bad idea for solution providers. Let me point out that this not a political stance, it’s a business stance based on industry executives I regularly speak with. I could care less about which side of the aisle you stand.
According to published reports, Obama is looking to bypass Congress through a program called ConnectED to expand an existing effort to increase Internet speeds throughout schools. It sounds noble enough and who wouldn’t want that? It would cost cell phones users about $5 a year for three years. But no one really believes it will actually end in that time. Taxes, like bridge tolls, never go backwards. Weren’t bridge tolls originally supposed to pay for the cost of the building the bridge?
Now, don’t get me wrong. No one I spoke to is against helping schools and most solution providers help their local communities in all sorts of ways. However, let’s put this in perspective. In New York City alone, mobile devices already carry 10 separate city, state and federal fees and charges, and that doesn’t include sales taxes, according to the New York Daily News. Where will it end?
Second, how is this going to impact the small-business community? Many small-business owners are embracing mobile technology to be more efficient and compete on a grander scale. They pick up the tab for their employee cell phones to get them to standardize on platforms and plans and to be able to support such devices. Multiply that $5 now by 50, by 100. This will make it more expensive for these businesses, which already are struggling to keep employees and keep prices down.
Solution providers know that for small businesses, every penny counts. More money on taxes, healthcare, goods and services means less money for expansion, upgrades and investing. Solution providers know that something always gives when the costs of doing business goes up.
Maybe these businesses won’t pay for their employees’ cell phone services anymore. Maybe they won’t upgrade to the latest smartphone. Maybe they will try and get more out of their existing Internet security, leaving them more exposed.
As we learned in my house, there are only so many ways to slice up a pie. When we had our third child, we were no longer able to order just one pizza because there were now five of us and one pie wasn’t enough. We first tried to ask the pizza place to cut it into 10 slices but my oldest two were still hungry. We had to start ordering a pie and a half. That may have been good news for the local pizza joint, but we had to cut back our visits to our favorite Chinese restaurant. Something had to give. There is only so much money coming in.
Knock 'em alive!