Stop the High Taxation of Wireless Phone Services

Late last year, the House passed a bill known as the Wireless Tax Fairness Act of 2011.  The bill is an attempt to stop state and local governments from adding any new taxes for the next 5 years onto an already over-taxed service that millions of Americans currently pay for—wireless phone service.  By 2015, it’s estimated that there will be 2 billion mobile devices in this country alone.  This important step in stopping the implementation of new out of control taxes is only the first stop—now, the bill has been introduced into the Senate by Senator Ron Wyden (D-OR) as an amendment to the Small Business Jobs and Tax Relief Act.  The bipartisan bill is due for a Senate vote soon and could put an end to the discriminatory and unfair taxes on levied on cellular service consumers.

Right now, nearly half of all states impose some sort of wireless tax above 10%.  The average tax on wireless phone service is actually 16.3%, with consumers in 5 states actually being charged over 20% in taxes.  Worse yet is the statistics that show the awful outcome of many of the taxes that are collected via wireless taxes.  Much of the increases have come as a result of the Universal Service Fund (USF), whose funds are meant to be earmarked to provide service to rural and low-income areas.  A recent study shows that of the taxes meant for the USF, 59 cents out of every dollar is wasted on bureaucratic and administrative costs, leaving little left for what the program intended. 

The Wireless Tax Fairness Act is important because it would put a stop to states and localities from attempting to fill budget holes and balance budgets on the backs of wireless phone consumers.  These taxes are discriminatory as they target one segment of the population.  They’re also nearly hidden as well—cell phone bills can be so complicated and long that they can be sometimes undecipherable.  Many consumers oftentimes don’t realize the massive tax they’re paying for their cell coverage.

With policymakers always espousing the need for consumers to have better, faster and wider access to the Internet, these outsized taxes can be an inhibitor to getting low and middle-income consumers to embrace the service.  Many low-income consumers only access to the Internet comes through wireless service.  And President Obama’s National Broadband Plan has called for all Americans to have reliable access to the Internet—these wireless taxes are a huge impediment to this goal.  Earlier this year, a paper was published that showed that discriminatory taxation can lead to underutilization of what’s being taxed—something we can’t afford when it comes to wireless technology.  Any outsized taxes on an industry and service that plays such a large role in spurring our economy, creating jobs and connecting people around the world should be pared back in order to spur these economic benefits.

The Senate should act quickly to pass this legislation and put it in front of the President.  In these unstable economic times, we can ill afford to have a system where wireless consumers are taken advantage of, merely to satiate the spending appetites of state and local legislators.  Although Congress can’t fix the dysfunctional tax codes of many states that have brought on these outsized tax bills, in its role of regulating interstate commerce it can take measures to put a cap on these discriminatory tax bills.

Zack Christenson write on digital tech issues for the American Consumer Institute

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