New Study Shows that Wireless Taxes Take Bigger Bite

David Williams

November 21, 2012

Like the inch worm that travels miles by merely lurching along inch by inch so too do wireless taxes continue to creep up bit by little bit. In the same way as the inch worm, these taxes are often just a small amount here and a little bit there, but after a while those “little bits” add up to quite the hit on your bottom line.  Before you know it, the tax burden coming from federal/state/local wireless taxes and fees take more and more of your money, meaning you’re left with less and less to spend on other goods and services.

A new study by Scott Mackey of KSE Partners does a great job of putting into perspective just how much the steadily increasing wireless taxes and fees burden you and your family, the American consumer. For example, the study found that the average American now pays more than 17 percent in monthly wireless taxes and fees – up from an average of 16.3 percent in 2010.  This breaks down to a little over a 5 percent increase in taxes in just two years.  If rates continue to rise at these speeds, the comparison to an inch worm won’t work.  A road runner, unfortunately, may provide a more fitting description.

Mackey’s study goes on to explain that wireless customers are now charged a rate that is 2.5 times higher than other taxable goods and services.  Additionally like so many other harmful taxes, the various wireless taxes and fees are regressive in nature.  This means that the taxes hit the poorest among us the hardest because they have little disposable income as is.  If they have to spend more money paying taxes, they will have less money to spend on necessities.  This group will also be forced to make tough choices about what other goods they must forego, no longer being able to purchase because of the money lost to pay taxes.

Fortunately some members of the U.S. Senate and House of Representatives have recognized the inherent problems with the structure and rate of existing federal/state/local wireless taxes.  For this reason, Senators Ron Wyden (D-OR) and Olympia Snowe (R-ME) sponsored the Wireless Tax Fairness Act (which restricts “any State or local jurisdiction from imposing a new discriminatory tax on cell phone services, providers, or property), serves as an important step forward in the fight to begin reducing tax burdens placed on wireless consumers.  Politico reported on November 14 that the Senate will begin considering this measure, “which would freeze current rates where they are for five years. The House passed a version of the measure last year.”

While we should not lose hope that this Congress can get this job done, at the same time we know better than to put a lot of hope in members of Congress doing the right thing for taxpayers.  So as this Congress nears its close, taxpayers need to begin focusing on efforts to educate new members about this pervasive problem.  It’s up to us to keep the pressure on members of Congress so they know we won’t stand for more taxes on wireless services.