Policy Documents

Research & Commentary: West Virginia Wireless Taxes for Tourism

February 5, 2014

In January, West Virginia state Sen. H. Truman Chafin proposed a $10 million increase in the tax on wireless services to increase funding for the West Virginia Division of Tourism. The proposal would require the new tax revenue to be used “for the promotion and maintenance of outdoor activities including, but not limited to, skiing and white water rafting.” 

As of 2010, 20.5 percent of West Virginia households had cancelled their landlines and become wireless-only users. This figure has reached 36 percent nationwide according to CTIA, a wireless industry trade group. 

In many states wireless tax rates have reached all-time highs. Almost half the states nationwide now impose a wireless tax above 10 percent; the national average is more than 16.3 percent. Even as revenue earned per wireless phone falls, taxes and fees climb. Many of these taxes are being used to fund programs and services that are in no way related to telecommunications. 

Until now, West Virginia has done a decent job of keeping its wireless taxes low. According to the Tax Foundation, West Virginia’s wireless taxes are lower than those of many other states, ranking 45th in the nation. This new tax would be a step away from what has been a positive tax policy that does not place unnecessary burdens on consumers.

John Nothdurft, director of government relations at The Heartland Institute, explains, “There is no legitimate reason that a tax on wireless businesses should be used to fund tourism. West Virginia has a competitive, albeit still too high wireless tax rate compared to the rest of the country. Instead of surrendering this advantage, the state should focus on preserving any competitive tax advantages it has, whether on incomes, sales, or wireless services.” 

Using wireless tax dollars to fund tourism improvements is a gross misuse of state taxing powers. Although improving tourism can spur economic growth, investments like those proposed are best left to private industry. Increasing wireless taxes can be much more harmful; high wireless taxes burden consumers and the wireless market, deterring innovation and infrastructure improvements, while disproportionately affecting minority and low-income populations. 

Instead of imposing an additional burden on taxpayers, who saw their per-taxpayer tax burden rise to $18,600 in 2012, West Virginia legislators should focus on reducing state spending, which has soared, increasing by as much as 43 percent between 2000 and 2010, according to the National Taxpayers Union.

The following documents consider the impact of wireless taxes.

Ten Principles of Telecom Policy
http://heartland.org/policy-documents/ten-principles-telecom-policy
In this Heartland Institute Legislative Principles booklet, Hance Haney and George Gilder examine the results of telecom reform in Indiana, the advances made by other innovation leaders in the telecom market, and how other states can follow their lead to reap the rewards of new investment in telecommunications services. 

Taxing Wireless to Pay for …West Virginia Tourism?!
http://www.ntu.org/governmentbytes/telecom/taxing-wireless-to-pay.html 
Lee Schalk of the National Taxpayers Union discusses the proposed wireless tax for tourism in West Virginia and points out the many problems with wireless taxes. 

Fees, Taxes on Wireless Services Keep Climbing
http://news.heartland.org/newspaper-article/2012/12/12/fees-taxes-wireless-services-keep-climbing
Writing in the Heartlander digital magazine, Matthew Glans discusses a new report by Scott Mackey of KSE Partners, who examines the burden wireless taxes and fees place on phone users. Mackey finds the taxes and fees have climbed steadily, from an average of 16.26 percent of wireless bills in July 2010 to 17.18 percent in July 2012—a 5.5 percent increase in just two years. 

Wireless Tax Fairness Act Is a Step in the Right Direction
http://blog.heartland.org/2011/07/wireless-tax-fairness-act-is-a-step-in-the-right-direction/
Elizabeth Henderson speaks with several experts from The Heartland Institute about the Wireless Tax Fairness Act. The experts conclude policies that restrain the excessively high taxes on this industry will be good for consumers and the economy. 

Wireless Taxes and Fees Continue Growth Trend
http://heartland.org/policy-documents/wireless-taxes-and-fees-continue-growth-trend
Scott Mackey examines the growth of wireless taxes and fees and their effect on consumers. He argues wireless consumers bear a disproportionately high burden from these excessive taxes and fees imposed by the federal government and many state and local governments. “[M]any states have a long way to go to reduce the wireless consumer tax burden to levels comparable to the sales taxes imposed on other goods and services sold in the competitive economy,” Mackey writes. 

Wireless Taxes and Fees Keep Rising
http://reason.org/blog/show/wireless-taxes-and-fees-keep-rising
Heartland Institute Senior Fellow Steve Titch discusses the 2011 version of Scott Mackey’s wireless tax study that found wireless users, on average, face a combined federal, state, and local tax and fee burden considerably higher than the average retail sales tax rate. “Targeting wireless consumers … disproportionately affects poorer families and may have ramifications for long-term state economic development and growth,” Titch writes. “Higher taxes on wireless service, coupled with increased taxes on wireless investments, may lead to slower deployment of wireless network infrastructure, including 4G wireless broadband technologies that an increasingly mobile workforce relies on for economic success.”

State and Local Governments Impose Hefty Taxes on Cell Phone Consumers
http://taxfoundation.org/article/state-and-local-governments-impose-hefty-taxes-cell-phone-consumers
U.S. wireless consumers pay an average of more than 17 percent in taxes and fees on their cell phone bills, including more than 11 percent in state and local charges, according to this analysis by the Tax Foundation. In Nebraska, the combined federal-state-local average rate is nearly 24.5 percent, and in six other states (Florida, Illinois, Missouri, New York, Rhode Island, and Washington) it exceeds 20 percent. 

State Wireless Tax Rankings
http://www.mywireless.org/state-issues/state-tax-rankings/
MyWireless.org ranks each U.S. state according to the level of wireless taxes and fees paid by its consumers. 

CTIA: Wireless Taxes, Fees and Surcharges
http://www.ctia.org/advocacy/policy_topics/topic.cfm/TID/27
CTIA-The Wireless Association argues excessive and discriminatory taxes imposed on a service, such as those on wireless telecommunications, discourage its use. The organization argues such arbitrary burdens on wireless consumers make no sense from an economic or tax fairness standpoint, especially when policymakers say they want to increase access to affordable broadband.

Nothing in this message is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit InfoTech & Telecom News Web site at http://news.heartland.org/tech, The Heartland Institute’s Web site at www.heartland.org, or PolicyBot, Heartland’s free online research database, at www.policybot.org

If you have any questions about this issue or the Heartland Web site, contact Senior Policy Analyst Matthew Glans at 312/377-4000 or mglans@heartland.org.