Opinion

The high price of wireless taxation

Zack Christenson Research Fellow, American Consumer Institute
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A few weeks ago, the Wireless Tax Fairness Act was re-introduced into the House, a bipartisan bill that hopes to end, at least temporarily, the high levels of taxation and fees levied on consumer wireless bills. Today, Senators Wyden (D-OR) and Toomey (R-PA) re-introduced the bill into the Senate.

The bill very closely resembles the same bills that were introduced into both houses last session but were killed when the Senate failed to take action. The bill aims to put a 5-year moratorium on any new taxes or fees, both at the state and federal level, for any wireless service.

Over the past several years, taxes on wireless phone bills have been skyrocketing. The national average across all 50 states for wireless taxes is 17.1%. As of July 2012, 28 states had wireless taxes above 15%, with 7 states having taxes above 20%.

And the bills continue to climb higher. According to Scott Mackey at KSE Partners, wireless fees and taxes continue to increase. In the two years from July 2010-2012, consumers saw an average increase of their wireless bill of 5.5%.

The average tax consumers are paying on their wireless bill is nearly 2 ½ times larger than the average sales tax imposed in most states. And these rising fees happen even as wireless carrier revenues go down. It seems that many state legislators find wireless bills an easy place to tack on new fees as it’s become a necessity for so many consumers.

It’s important that all consumers have affordable access to wireless devices, and government shouldn’t be in the business of making it more difficult. Government should ensure that consumers aren’t taxed and fee’d to the extent that they can’t afford what many consider their lifeline to the outside world.

According to a survey, 51% of people age 18-29 utilize a wireless phone as their main source of communication and have no landline. And 48% of African Americans and 51% of Hispanics find their wireless device to be more important than their landline.

As the Pew Internet and American Life Project report finds, “among smartphone owners, young adults, minorities and those with no college experience, and those with lower household income levels are more likely than other groups to say that their phone is their main source of Internet access.”

As you can see, taxing these services only hurts the least well-off among us.

This is an important piece of legislation that will help ease the cost of living for many consumers, at a time when most consumers find having a cell phone an absolute necessity. It’s also a time when the wireless industry happens to be at the forefront of innovation and job growth.

In closing, more and more Americans will continue to rely on their wireless service for both phone and Internet service, which will in turn lead to more job growth. But that job growth won’t happen if consumers are turned away by the spiraling costs of increased wireless service.

Zack Christenson writes on digital tech issues for The American Consumer Institute Center for Citizen Research.  For more information, visit www.theamericanconsumer.org