Cell Phone Tax Freeze Proposed in Congress

Published March 4, 2010

New York City residents pay the second highest cell phone tax rates in the nation, so high that a member of Congress is determined to prohibit the state and local governments from pushing them any higher.

Anthony Weiner (D-NY), vice chairman of the House Energy and Commerce Subcommittee on Communications, Technology, and the Internet, notes his constituents in the Big Apple are socked with a combined tax rate on cell phones of 16.20 percent, second only to Chicago’s 19.02 percent.

“Our cell phone bills have monthly fees for everything from city and state sales taxes to multiple surcharges,” said Weiner in December touting his co-sponsorship of the Cell Tax Fairness Act. “It’s gotten out of control.”

A Freeze, Not a Cut
The bill, HR 1521, would not cut federal taxes or fees on cell phone bills but would prevent local and state governments from singling out wireless plans for new taxes.

Kelly W. Cobb, state government affairs manager at Americans for Tax Reform in Washington, DC, applauds this effort by Congress to put a check on cell phone taxes. “When counting in all discriminatory, business, and sales taxes, over 46 percent of a consumer’s cell phone bill goes to paying for government,” he notes.

“This legislation is a great step forward for taxpayers and cell phone owners,” he said. “But in an ideal world, states and localities would actually reduce the massive tax burden on phones to one low tax rate.”

‘Restrain All Telecom Taxes’
George Pieler, a senior fellow with the Institute for Policy Innovation in Lewisville, Texas, said it’s fine for Weiner to argue for “fairness” in telecom tax policy, but “to say cell service should not be ‘singled out’ for taxation doesn’t restrain telecom taxes generally, so long as competing services—presumably, landlines and voice over Internet protocol service (VoIP)—get taxed too.”

“That equity idea could leave New Yorkers, or anyone, with higher and more sweeping taxes overall,” Pieler said. “What we want to see is restraint on all telecom taxes—period, exclamation point.”
‘Wireless Highway Robbery’
Pieler says telecom taxes have been growing because “it’s one of our biggest growth industries.” He calls the rates paid by residents of New York and Chicago “wireless highway robbery.”

“Just about everyone has a cell phone, and it seems like a robust, broad, easily tapped tax base,” Pieler said. “But high tax rates on cell service by definition restrain competition because they raise the consumer’s cost of accessing the service.

“Besides, cell phone service in particular is not anchored in any one jurisdiction—they’re portable, which is why they’re popular, and they cross state bounds and go overseas as well,” he added. “Why should I pay tax to New York, say, for a call I make from Munich to Tulsa?”

James G. Lakely ([email protected]) is co-director of The Heartland Institute’s Center on the Digital Economy and managing editor of InfoTech & Telecom News.