February 24, 2011 — Tallahassee Democrat published an opinion piece written by Steve Pociask. It discusses the unusually high tax rate on wireless telephone services. Three times higher than the sales tax rate, Florida is among the highest in the nation. You can visit the Tallahassee Democrat here
Florida’s Cell Phone Taxes
What should Florida policymakers do if they want to discourage some risky or costly behavior? Just tax it. High gasoline taxes discourage driving. Likewise, sin taxes on tobacco and alcohol are designed to curb their use. Simply put – if you want to discourage consumption of some good or service, just tax it and tax it high.
An extensive analysis by economist Scott Mackey shows that the average U.S. wireless subscriber pays taxes and fees on his or her cell phone bill totaling 16.3%, compared to 7.4% for taxes on other goods and services. Among the worst offenders of these discriminatory taxes is Florida. Mackey’s analysis estimates that state, local and federal cell phone taxes total 21.6% in Florida, about three times higher than the average sales tax in that state and fourth highest in the country. Who said talk is cheap?
However, for a growing segment of consumers, particularly young and lower income consumers, cell phones are their sole means of keeping in touch with friends and family, as well as contacting “would be” employers, community services and calling E911. Why would we want to discourage use of these advanced services?
Around the country, these consumer taxes and fees sometimes include additional charges that are supposedly collected for E911 services or fire protection, but they are actually spent for other purposes or are used to supplement the general fund. They include fees imposed on high-speed wireless services that are used to subsidize outdated plain old wired telephone services. In other words, these taxes and fees discourage investments and jobs in high-tech services and infrastructure in order to prop up communications services and infrastructure that are increasingly in decline. Moreover, since these new services are relatively price sensitive, increased taxes lead to a declining tax base. This also means that taxing wireless services lowers consumer spending in wireless and broadband services, producing negative consequences that particularly affect lower-income and younger Americans.
Wireless services are not an evil scourge deserving of excessive consumer taxation. With that in mind, it is time for Florida policymakers to phase out their discriminatory taxes. Don’t tax what you want to encourage.
Steve Pociask is president of the American Consumer Institute Center for Citizen Research, a 501c3 educational and research institute.