New Study Highlights State Wireless Tax Rates

Michi Iljazi

October 20, 2014

The evolution of the cellular phone has come a long way, so much so that what consumers use their phones for has become a crucial part of how many of us go about our daily lives. Unfortunately with that innovation and advancement in technology that has taken us from the flip phones of yesterday to the smartphones of today, comes a heavy tax burden from federal and state government. Regardless of what state someone resides in, they’re paying excessive taxes for something that has become commonplace in their life.

On October 8, the Tax Foundation released a study that examines wireless tax rates for each of the fifty states. Joseph Henchman of The Tax Foundation and Economist Scott Mackey, authors of Wireless Taxation in the United States 2014, give plenty of information to sift through in this report:

Wireless consumers continue to face excessive tax burdens when compared to the tax burden on other goods and services purchased in the competitive marketplace. The average rates of taxes and fees on wireless telephone services are more than two times higher than the average sales tax rates that apply to most other taxable goods and services.

Here are some of the important highlights from the Tax Foundation study:

  • Americans pay an average of 17.05 percent in combined federal, state, and local tax and fees on wireless service. This is comprised of a 5.82 percent federal rate and an average 11.23 percent state-local tax rate.
  • The five states with the highest state-local rates are: Washington State (18.6 percent), Nebraska (18.48 percent), New York (17.74 percent), Florida (16.55 percent), and Illinois (15.81 percent).
  • The five states with the lowest state-local rates are: Oregon (1.76 percent), Nevada (1.86 percent), Idaho (2.62 percent), Montana (6.00 percent), and West Virginia (6.15 percent).
  • Four cities—Chicago, Baltimore, Omaha, and New York City—have effective tax rates in excess of 25 percent of the customer bill.
  • The average rates of taxes and fees on wireless telephone services are more than two times higher than the average sales tax rates that apply to most other taxable goods and services.
  • Excessive taxes on wireless consumers disproportionately impacts poorer families.

The use of cell phones in America today is something that is a given for much of the population, and consumers everywhere are being hit with excessive tax rates from the government for fees & services they don’t see any benefit from at all. The Pew Research Center put out their Mobile Technology Fact Sheet, and detailed just how many of us are using cell phones today here in the US and as of January 2014:

  • 90% of American adults have a cell phone
  • 58% of American adults have a smartphone
  • 67% of cell owners find themselves checking their phone for messages, alerts, or calls — even when they don’t notice their phone ringing or vibrating.
  • 44% of cell owners have slept with their phone next to their bed because they wanted to make sure they didn’t miss any calls, text messages, or other updates during the night.
  • 29% of cell owners describe their cell phone as “something they can’t imagine living without.”

The data above should leave no doubt in terms of quantifying just how large a role wireless plays in the daily lives of people from all across the country today. Equally, the Tax Foundation study should leave no doubt that cell phone users are being squeezed excessively for taxes from the government at both the federal and state level.

Contrary to the usual work done by Congress, there is actually bipartisan legislation that could give consumers some relief from the harsh wireless taxes they are facing. The Wireless Tax Fairness Act, from Rep. Zoe Lofgren (D-Calif.) and Rep. Trent Franks (R-Ariz.) wouldn’t require any states to give up revenue earned, but what the bill would do is place a moratorium for 5 years, where all stakeholders would work together to figure out exactly which path to take on wireless taxes that would be beneficial to all parties involved (consumers, businesses, state/local governments). The legislation also calls for the very same stakeholders to find a solution to address the already high tax rates burdening the wireless industry.

The Taxpayers Protection Alliance has been a vocal critic of the increasing tax burden that wireless customers are facing in states across America.  Consumers shouldn’t be taken advantage of by a government willing to exploit something as necessary as a cell phone to create yet another revenue stream from which to waste taxpayer money.

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