Congress Turns Its Attention to the State Wireless Tax Burden

What do the National Governors Association, the National Conference of State Legislatures, the National Black Caucus of State Legislators and the American Legislative Exchange Council have in common? These groups all oppose excessive and discriminatory taxes on the wireless goods and services that Americans rely on to contact employers, stay in touch with loved ones, and access emergency services. And now Congress is taking a serious look into the matter.

Americans today are more reliant on wireless services than ever before. Mywireless.org’s annual survey results reveal that over half of respondents age 18-29 are wireless-only consumers. In fact, 43% of respondents feel their wireless phone service is more important than broadband Internet or cable television service and 78% believe wireless services to be an integral part of their daily lives.

Wireless consumers—now over 90 percent of Americans—currently face a combined federal, state and local tax burden averaging over 17%, with consumers in 46 states and the District of Columbia paying more in wireless taxes and fees than in general sales taxes. For over a decade, the groups listed above and others have called for fairer and simpler taxes and fees on wireless devices and services. However, poor policy decisions of the past eleven years have led to rapid increases in costs for wireless as taxes and fees increased three times faster than those on general goods and services.

These taxes and fees have hit some areas, such as Baltimore, very hard. In 2004, Baltimore imposed a $3.50 per line per month charge on city residents. Six years later, the city council increased the fee to $4.00. Consumers didn’t have much relief in other jurisdictions; nearby Montgomery County, Maryland increased its wireless fee from $2.00 to $3.50. While this combination of taxes and fees significantly increases the cost of service for all consumers, low income users are disproportionately impacted.

Wireless is no longer a luxury for the wealthy, but rather a necessity for all. Nearly all businesses and individuals rely on wireless service for routine activities and studies show that low-income families actually spend more of their disposable income on wireless services than middle and high-income families. These regressive wireless taxes apply regardless of how much a customer pays per month, making it more difficult for low-income families who cannot afford the high fees.

The total wireless tax rate in Baltimore stands alarmingly high at 26.76%, a taxation rate well over four times the general business tax rate. Unfortunately, Baltimore isn’t alone in suffering from excessive and discriminatory wireless taxes and fees; from Los Angeles to New York City and from Chicago to Dallas, nearly half of the states face double-digit state and local taxes and fees on wireless services.

With Americans increasingly relying on wireless as their primary telecommunications service, it is ever more important for policymakers to not adopt policies that might discourage the use of wireless services and hinder investment in the sector. The Exchange Council seeks a fair and reasonable tax regime that encourages growth in adoption of mobile broadband services. To this end, the Exchange Council believes the states should heed the call to adopt policies preventing any new and discriminatory taxes on the wireless technologies essential for Americans’ daily lives.