Research & Commentary: Nebraska’s Telecommunication Taxes

Published February 3, 2011

Nebraska state Sen. Deb Fischer (R) of Valentine is proposing a law to phase out the municipal service occupation tax on telecommunication services and require voter approval before municipalities can impose higher telecommunication taxes.  Reducing taxes and fees on telecom services encourages economic growth and helps open these services to more low and moderate income Nebraskans.

A 2007 study by The Heartland Institute found consumers across the nation “pay 17.23 percent of their average monthly landline (traditional) phone bill in taxes and fees” and “11.78 percent of their average monthly wireless bill to the government.” These numbers are even higher in Nebraska, which currently has the highest wireless taxes and fees in the nation, according to, a national nonprofit consumer organization.

High telecommunication taxes take more money out of the hands of Nebraska taxpayers, stifle market competition, and reduce the amount of capital that can be invested in innovation and service improvements for consumers.

States and localities concerned about budget shortfalls should not hinder economic growth at the expense of taxpayers. Instead they should look for ways to cut spending, set priorities for government, eliminate waste, and encourage economic growth. Without economic growth and proper restraints on spending, no rate of taxation will ever be high enough to create the sustainable amount of revenue necessary to balance these budgets.

The following documents offer additional information on telecommunication taxes.


Taxes and Fees on Communication Services
This policy study by The Heartland Institute “documents taxes and fees on communication services, describes their destructive consequences, and calls for tax and regulatory reform.”

Excessive Taxes and Fees on Wireless Service: Recent Trends
This report by Scott Mackey, a partner and economist at Kimbell Sherman Ellis LLP, considers the negative effect of high wireless taxes on consumers and local economies. Mackey writes, “Wireless consumers continue to pay excessive and burdensome state and local taxes on their wireless service, even though economists and policymakers agree that there is no rational economic basis for excessive taxation of the industry and its consumers.”

Survey Says: Majority of Nebraskans Support Phasing Out the ‘Municipal Occupation Tax’
This survey by McLaughlin & Associates on January 26-27, 2011 asked likely Nebraska voters whether they would favor phasing out the municipal occupation tax on telecommunication services. It found, “An overwhelming majority (76% to 12%) support phasing out rather than keeping the municipal occupation tax on telecommunication services over a 6-year period.”

To Strengthen State Economies, Ease Tax Burden on Wireless
This article from InfoTech & Telecom News notes how lowering the tax burden on wireless services could help strengthen state economies: “Instead of seeking new ways to subsidize or provide tax incentives for broadband deployment, states could spur significant new investment simply by lowering taxes on company investments and spurring additional consumer demand by lowering taxes on wireless service to the same rate as the general sales and use tax.”

Cell Phone Tax Freeze Proposed in Congress
This article from InfoTech & Telecom News reports on the Cell Tax Fairness Act and what effect the bill would have on states. Kelly W. Cobb, state government affairs manager at Americans for Tax Reform in Washington, DC, applauds the 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.”

Effective State, Local & Federal Telecommunications Taxes by State, 2004
The Tax Foundation charts and ranks how high the combined tax burden of telecommunication tax is in each state.


Nothing in this Research & Commentary 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 and other topics, visit The Heartland Institute’s Web site at, Heartland’s Budget & Tax News site (http://www./, InfoTech & Telecom News (, and PolicyBot, Heartland’s free online research database.

If you have any questions about this issue or The Heartland Institute, contact Government Relations Director John Nothdurft at [email protected] 312/377-4000.