Policy Documents

Research & Commentary: Wireless Tax Fairness Act Reintroduced

June 11, 2013

Almost half the U.S. states now impose a wireless tax above 10 percent; the national average is approximately 17.1 percent. Even as revenue earned per wireless phone falls, taxes and fees climb. Legislative efforts to combat these high tax rates may now be taking a step forward. This week, Reps. Zoe Lofgren (D-CA) and Trent Franks (R-AZ) reintroduced the Wireless Tax Fairness Act.

The act would put a five-year moratorium on discriminatory state wireless phone and data service tax increases. Although this wouldn’t prevent governments from creating new taxes and fees on all communications, it would disallow them from targeting any one service. A five-year freeze would slow the rate of tax increases while allowing more time to create a new taxing system for wireless that is more carefully developed, fair, and non-disruptive.

In a recent report, Scott Mackey of KSE Partners examined the burden these taxes and fees add to wireless phone users’ monthly bills. Mackey concluded wireless taxes and fees have climbed steadily; in just two years, from July 2010 to July 2012, the average wireless tax burden increased by 5.5 percent.

There are approximately 326 million wireless device connections in the United States today, including devices such as smartphones, feature phones, tablets, and personal wireless hotspots, according to the most recent data from CTIA, a wireless industry trade group. About 36 percent of U.S. households have become wireless-only, canceling their traditional landlines.

John Nothdurft, director of government relations at The Heartland Institute, says the Wireless Tax Fairness Act is a necessary step in encouraging wireless expansion and ending a discriminatory tax targeted on one industry: “There is no legitimate reason that the combined tax rate on mobile devices should be twice as high as the tax on other goods and services. These discriminatory taxes will hinder the growth of an industry that is on the front lines of innovation and job creation.”

High wireless taxes burden consumers and the wireless market, deterring innovation and infrastructure improvements, while disproportionately affecting minority and low-income populations. A moratorium on these discriminatory tax hikes would benefit the economy and consumers.

The following documents consider the impact of wireless taxation.


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.  

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 add to phone users’ monthly bills. Mackey concludes 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. This amounts to 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 Service Taxes Now Double Sales Taxes
http://news.heartland.org/newspaper-article/2011/05/19/wireless-service-taxes-now-double-sales-taxes
Writing in the Heartlander digital magazine, Phil Britt covers the growth of wireless taxes and fees. The article notes wireless telecom customers are paying a combination of federal, state, and local taxes on their bills that often far exceeds the retail sales tax rate. 

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 the 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. “Although study commissions are considering reforms in Delaware, Florida, and Maryland, this study shows that many 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 imposed 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.