Most of us know that wireless phones are indispensibletools for businesses and individuals today. Unfortunately, it does not appearthat most elected officials got the message to that effect.
A new reportpublished in State Tax Notes shows that, after several years of relativestability, taxes and fees on wireless service are on the rise again. Wirelessusers now pay a combined federal, state, and local tax and fee burden of 16.3%,twice the rate of the average retail sales tax and the highest wireless rate insix years.
Nebraska, with a combined rate of 23.69%, continues to holdthe dubious honor of “the nation’s highest wireless tax state,” followed byWashington (23%), New York (22.83%), Florida (21.62%), and Illinois (20.90%).The states with the lowest combined wireless tax rates are Oregon (6.86%),Nevada (7.13%), Idaho (7.25%), Montana (11.08%), and West Virginia (11.28%).
According to Scott Mackey, the economist who authored thereport, most states have not increased wireless-specific rates, but rather haveexpanded sales taxes to more wireless services and goods. But at the same time,many local governments have aggressively imposed new and higher taxes and feeson wireless users. For example, the City of Baltimore and Montgomery County,both in Maryland, raised the per-line tax by 50 cents and $1.50, respectively,a burdensome cost for families who use multiple phone plans. Additionally, theCity of Lincoln, Nebraska increased the business telecommunications license taxfrom 5.5 to 6 percent, which means that someone spending $48 per month onwireless service (the industry average) pays $11.35 just in taxes, fees, andsurcharges before paying the cost of the service.
With states and cities in fiscal dire straits, there will bea strong temptation to raise wireless taxes and fees. This is a shame becauseas wireless taxes and fees increase, the cost of using thosegoods and services also increases, which could slow economic activity.Fortunately, as wireless consumers learn more about the tax burdens they mustpay, they have become more outspoken against higher burdens to pay for recklessspending by government. Hopefully, this new report will encourage moreconsumers to speak out and elected officials will finally get the message.