Kentucky bill seen as attack on prepaid phone users

The legislature of the state of Kentucky introduced a bill that would substantially increase fees on users of prepaid wireless services to help pay for the state's emergency 911 services. Kentucky House Bill 391 would apparently add a tax to prepaid wireless users that would raise their fees by 360 percent to offset the fall in emergency services funding as users of landlines decrease.

The Kentucky League of Cities association said that Kentucky 911 services are funded primarily through revenue from fees levied on landline and wireless users. But revenue for such services has suffered as more people eliminate landline use in favor of mobile phones.

"As more Kentuckians phase out landline use, cities and counties are faced with declining revenues for 911 services," the association said in a blog post on its website. "The wireless fee, which is set by the Kentucky state legislature, has not changed since 1998. This outdated funding structure has created a shortfall for an essential emergency service."

The KLC added that the bill would modernize 911 user fees to reflect the shift from landline to mobile phone usage.

A punitive tax on prepaid?

However, two consumer advocacy groups oppose the legislation. Consumer Action and the Community Action Partnership said that the bill would "sock poor Kentucky residents with an astronomically high 360 percent increase." The groups stated that the 70 cents collected on each $50 of prepaid wireless usage today would be raised to $1 on every $20 of service.

Typically, prepaid phone users are individuals without bank accounts and bankcards that can be linked to accounts in order to pay for traditional postpaid wireless data plans. The lower-income unbanked or underbanked are thus considered primary users of prepaid phones, where they can top up accounts by paying for prepaid wireless cards with cash.

"[A] punitive tax on prepaid cell phones that would disproportionately harm Kentucky's senior citizens (particularly those on fixed incomes), veterans, the disabled, and low-income residents seems like the wrong solution to the challenge of paying for E-911," the groups said.

The groups noted that the legislation does not require postpaid users to pay a 911 tax. The advocates favor legislation that would tax prepaid and postpaid users at equal rates or, alternatively, have the current legislation amended to remove the sales tax on prepaid phone 911 charges.

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