Recently, the Tax Foundation, a non-partisan think tank, released its annual study on wireless tax burdens among the states. The report estimates that taxpayers are shelling out over $17 billion annually in federal, state, and local taxes and fees for their wireless devices, while the overall wireless burden increased to a record national average of 18.6 percent.
The combined rate includes state and local tax levies and as well as the federal Universal Service Fund (USF) charge with a rate of 6.64 percent, which is set by the Federal Communications Commission (FCC) on a quarterly basis. In recent years, the burden has been made heavier mostly due to increases in the FCC’s USF contributions, but this year, the state and local taxes and fees became the primary culprit.
While Washington State led the way with a combined state, local, and federal rate of over 25 percent, several northeastern states ranked extremely high on the list. New York, with a total rate nearly that onerous, was third highest in the country and the worst in the northeast region. Pennsylvania ranked fifth nationally, which jumped three spots over its 2015 ranking due to a recently enacted 911 emergency fee increase. The result: an average combined rate of over 22. Meanwhile, just outside the top five was Rhode Island, which had a combined federal, state, and local tax levy of almost 21.5 percent.
Though the average wireless tax levy is at an all time high, there’s another worrisome practice that continues with little scrutiny – diversion of so-called “911 fees” for other uses that have nothing to do with maintaining emergency call networks. According to the FCC, approximately 70 percent of 911 calls originate from a wireless device. Wireless users are generally comfortable with 911 fees as long as the revenue is used for emergency response, but an FCC report released at the end of 2015 notes that a small but prominent group of states are diverting these fees for other budgetary purposes.
The most egregious abuser of this practice has been New Jersey. The Garden State collected $120,000,000 in 911 fees in 2014 and diverted more than $106,000,000–or 89 percent—of the revenue. According to a recent NJ.com story, “… of the $1.37 billion the state has collected in 911 fees since 2004, only 15 percent, about $211 million, has been used to help pay for the 911 system.” Likewise, Rhode Island diverted more than 69 percent of the $17,640,703 it collected in 911 fees in 2014.
Meanwhile, New York diverted 41.6 percent of the approximately $185 million in collected in 911 fees in 2014 – or more than $77 million. A recent AP story highlights that over the last five years, New York has funneled approximately $400 million of the roughly $945 million it has raised in 911 fees to the Empire State’s general fund where much of it went for wasteful government programs.
911 fee diversion is ill-conceived for a number of different reasons. For starters, it is a budgetary gimmick that confuses consumers about the true purpose of the fee they pay on their monthly wireless bill. Likewise, in their zeal to fund pet projects out of 911 collections, state lawmakers are putting lives at risk. Many states are struggling to finance a critical upgrade to their emergency response system, known as NextGen 911. This advanced technology would allow people to share information in real time with emergency dispatch centers and allow communication through video, text, and photo. If implemented nationwide, the FCC estimates that NextGen 911 would save more than 10,000 lives a year.
The top priority of all governments should be protecting citizens in a fiscally responsible and transparent manner. These recent reports demonstrate that several state governments are failing to live up to that basic duty, and are encouraging others to take the same careless attitude.