Spectrum Tax or Spectral Tax? YOU Make The Call!

The sharp-eyed policy wonks here inside the Beltway spotted a line item in President Obama’s budget proposal called a “spectrum license user fee.” This tax – sorry, fee – would be assessed against users of spectrum blocks that are licensed but not auctioned. These include most AM, FM, and TV, most two-way mobile radio and fixed microwave, and all satellite, amateur radio, and several other categories. Unlicensed spectrum, such as that used for Wi-Fi and Bluetooth, would be exempt. Even so, the new fee is projected to bring in $200 million in 2010, increasing steadily to $550 million by 2019.

Outraged at this extra dip into the pockets of hard-working Americans? We don’t blame you. But don’t call your congressman quite yet. The chances of anybody ever actually paying this fee are small. The reasons have to do with the annual Washington ritual of budget politics.

When you or I draw up a household budget, we list actual income and actual expenses, with the goal of making the second number come out smaller than the first. And that’s exactly how the federal government does it. Well, with just a couple of minor differences. For one, the government thinks it is okay for expenses to exceed income. Almost every federal budget for decades has shown a deficit. The other difference: the government does not feel any need to use real numbers. Made-up numbers work just as well. Often better.

That is where the spectrum license user fee comes in. Those hundreds of millions of dollars of projected revenue reduce the projected deficit and reassure us taxpayers that our representatives in Washington are handling our money responsibly. Except that nobody in Washington expects the spectrum license user fee actually to be collected. The same fee has appeared in every president’s budget proposal over the past several years. But it has never been enacted into law by Congress. The revenue in the proposal turns into added deficit in the actual budget. Year after year.

This is like you or me filling out a mortgage application with an imaginary job that pays, we decide, half a million a year. “It’s just a pretend job,” we tell the mortgage company. “So of course we don’t have pay stubs, or anything. But just count it anyway.” Can you imagine a mortgage company falling for that? Okay, bad example. But the point is, revenue from the spectrum license user fee is just as imaginary.

In today’s era of change, though, this could be the year when Congress actually enacts the fee. We don’t think so, but we’ll keep an eye on it and let you know. That’s what we policy wonks do, here inside the Beltway.