An Omaha state senator says your cellphone taxes are too high, but his proposed fix is viewed as too costly by the cities of Omaha and Lincoln.

Omaha Sen. Tony Vargas’ bill would wipe out more than $5 million in annual revenue for the City of Omaha, officials say. Lincoln would lose about $4 million, Finance Director Brandon Kauffman said.

Legislative Bill 550 would require cities to get approval from voters before imposing taxes or fees on wireless phone services. If enacted, it would immediately eliminate Omaha and Lincoln’s occupation tax on cellphone services.

The Omaha City Council adopted a resolution Tuesday opposing the bill. Council President Ben Gray said the city can’t afford to lose more than $5 million in revenue. Council member Aimee Melton said it was an issue of local control.

Vargas said his bill targets what he considers to be hidden taxes that get passed on to consumers.

“Most people don’t see it,” Vargas said. “Your cellphone bill is getting higher and higher because a larger percentage of the cellphone bill is made up of taxes.”

The occupation tax on wireless services is 6.25% in Omaha and 6% in Lincoln. It is charged to the company, not to the consumer directly, so it typically doesn’t show up on a customer’s bill.

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The bill advanced from the Legislature’s Transportation and Telecommunications Committee on a 6-1 vote, with one senator abstaining. Because Vargas prioritized the bill, the Legislature is expected to debate it.

Vargas, who represents downtown and part of South Omaha, noted that Nebraska’s taxes on cellphone services rank fourth highest in the country, according to the Tax Foundation.

In Omaha and Lincoln, the combined local and state tax on cellphone service approaches 19%. That doesn’t include the federal tax of 6.64%.

“Being the fourth highest in that arena, I don’t think is good for consumers,” Vargas said. “That’s really an undue burden on people in the community ... everybody uses cellphone services.”

If the Legislature does away with the local cellphone taxes and fees, Omaha would still need to balance its budget somehow, city lobbyist Jack Cheloha said.

“If we’ve counted on that revenue in prior years, and all at once it disappears, they would more likely than not have to find the money elsewhere or make significant cuts,” Cheloha said.

If shifted to property taxes, that would increase the city property tax rate by 2 cents per $100 of assessed value, he said.

Vargas said his bill “makes sure people have a voice in whether or not they want this additional, special tax — this occupation tax — levied upon them,” by putting it before voters.

Cheloha said other companies that pay local fees and taxes have expressed concern about the bill because it gives wireless companies a competitive advantage.

The resolution passed by the Omaha City Council notes that the occupation tax is currently applied uniformly to both wireless companies and landline companies. The bill would give preferential treatment to wireless providers, in conflict with federal law, the resolution says.

“Why would we give a break to wireless?” Cheloha said.

An earlier version of the bill would have eliminated some state cellphone fees and taxes, but those sections were removed after concerns were raised about the effect on services for deaf and hard of hearing, 911 systems and the state’s budget.

World-Herald staff writer Aaron Sanderford contributed to this report.

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