A bill to impose a five-year moratorium on new state and local taxes on cell phones and other wireless services has been introduced in Congress.
“Wireless connectivity is becoming the simplest and easiest route of choice to the Internet, but instead of encouraging that, we’re burdening it with taxes,” said Rep. Zoe Lofgren (D-CA), in a statement. She introduced the Wireless Tax Fairness Act of 2013 (H.R. 2309) with Rep. Trent Franks (R-AZ).
“This bill is needed to hit the pause button and stop these arbitrary taxes from increasing. By doing so, we’ll bring needed stability to the wireless marketplace for customers to choose their services based on merit and need so we can see these platforms of innovation and job growth expand,” Lofgren said.
The House of Representatives passed a previous version of the Wireless Tax Fairness Act in November 2011, but it did not advance in the Senate.
Huge Disparities
The disparities in wireless service taxation are huge. Oregon has the lowest combined wireless tax rate in the country, at 7.67 percent. Neighboring Washington has the nation’s second-highest combined tax rate on wireless services, at 24.44 percent. The combined rate includes local, state and federal taxes.
Populous states such as Illinois, Florida, and New York also have tax rates on wireless service in the 20 percent range. Altogether, the average combined wireless tax rate in the United States is 17.18 percent, up one percentage point from when the 2011 bill was proposed, and more than twice as much as the average state sales tax rate of 7.4 percent.
“[Wireless taxes] fall disproportionately on lower-income and working Americans who tend to rely more exclusively on wireless devices for telephone and Internet access and therefore pay a greater percentage of their income in wireless taxes,” Lofgren and Franks said in a joint statement.
‘Will Hinder Growth’
John Nothdurft, director of government relations at The Heartland Institute, said new discriminatory cell phone taxes “will hinder the growth of an industry that is on the front lines of innovation and job creation.”
Nan Swift of the National Taxpayers Union sent a letter of support to Lofgren and Franks, calling the five-year moratorium “an eminently reasonable, pro-consumer goal that provides a window of time for government and the mobile phone services industry to pursue fundamental telecom tax reform.”
The Wireless Tax Fairness Act is awaiting review by the House Committee on the Judiciary.
Dane Skorup ([email protected]) is interning at The Heartland Institute.
