Research & Commentary: Wireless Tax Fairness in the States

Published April 22, 2011

The Wireless Tax Fairness Act of 2011, currently pending in Congress, would put a moratorium on discriminatory state wireless phone and data service tax increases. A new report by economist Scott Mackey found wireless tax rates are at an all-time high: 23 states now impose a wireless tax above 10 percent, and the national average is more than 16.3 percent.

Despite these already-high taxes, the Federal Communications Commission and President Barack Obama are pressing for even higher levies to spend on extending wireless broadband to currently unserved locales. A recent Technology Policy Institute report found that 59 cents of every tax dollar in the Universal Service Fund is spent on administrative and other overhead expenses instead of actual infrastructure. Twenty-one states have similar funds imposing taxes on wireless providers to subsidize other telecommunications programs.

CTIA—The Wireless Association reports private-sector “investments in broadband networks play an important role in both the short-term recovery from the current recession, as well as long-term economic growth.” Increasing taxes on this sector will stifle economic recovery and disproportionately burden minority and low-income earners, two-thirds of whom live in wireless-only households. Taxes that make Internet access unaffordable harm the very groups they purport to assist.

These taxes deter private-sector innovation and infrastructure improvements, are costly to consumers, and disproportionately affect minority and low-income populations. A moratorium on such taxes would encourage economic growth and protect taxpayers.

The following documents consider the impact of wireless taxation.

House Bill 1002: Wireless Tax Fairness Act
This is the full text of the Wireless Tax Fairness Act as introduced in the House of Representatives. The bill prohibits states from levying taxes on wireless service: “No State or local jurisdiction shall impose a new discriminatory tax on or with respect to mobile services, mobile service providers, or mobile service property, during the 5-year period.”

State Tax Notes: Wireless Taxes
Economist Scott Mackey takes a close look at state-level wireless taxes, providing a chart of tax rates in each state.

Mobile Access 2010
This Pew research report finds many people are using mobile service as their sole portal to the Internet. Of these, most are minority or low-income.

The Universal Service Fund: What Do High-Cost Subsidies Subsidize?
Scott Walsten of the Technology Policy Institute traces tax money as it passes through the Universal Service Fund (USF), finding only 41 cents of every dollar make their way into programs.

U.S. Wireless Quick Facts
2011 data show the monumental growth of wireless-only Internet and phone service in many households and indicate wireless penetration has reached nearly 100 percent.

Monday Map—Wireless Taxation
This color-coded map from the Tax Foundation shows each state’s wireless tax rate and its ranking among the 50 states. Nebraska’s tax rate is the highest, at 18.64 percent, with Washington, New York, and Florida close behind. Best tax rates for wireless consumers: Oregon, Nevada, and Idaho.

Taxes, Fees, and Surcharges
CTIA—The Wireless Association points out U.S. wireless consumers pay on average 16.3 percent in taxes and fees. Higher taxation of mobile users and expanded wireless coverage, the latter a goal of the Obama administration’s National Broadband Plan, are mutually exclusive.

Why Are Some States Disproportionately Taxing a Service We Want More People Using?
Carl Gibson, director of the Center for Small Business, Technology, and Telecommunications at the Washington Policy Center, offers commentary and additional information on Mackey’s tax-rate study. He points out the largest recent increases in consumer taxation have come from the federal Universal Service Fund. Gibson writes, “imposing a disproportionately higher tax rate on a service we as a society are pushing people to use more of is duplicitous.”

Wireless Tax Expert Scott Mackey Talks Wireless Taxes & Fees
Economist Scott Mackey, author of the most comprehensive recent report on state mobile taxation, is interviewed here.

Taxes on Cell Phones Hit All-Time High, 10 Best and Worst States,2817,2380386,00.asp
PC Magazine writer Sara Yin takes a nonpartisan look at the increasing burden of state-imposed wireless taxes and examines how the money is spent: “A few states even tax wireless consumers for non-wireless-related projects. Utah funds its poison-control centers with a poison-control surcharge found on wireless bills, and in 2009 Wisconsin imposed a police and fire protection fee to subsidize local departments.”


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Nothing in this message is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. If you have any questions about this issue or the Heartland Institute Web site, please contact Marc Oestreich, legislative specialist in telecommunications, at 312/3774000 or [email protected].