In recent years, wireless users have become a favorite target for new state and local taxes. Today, state and local taxes and fees average about 14 percent of consumers’ cell phone bills. That’s almost double the cost of ordinary sales taxes.
Unfortunately, given ongoing state budget troubles, the rush to tax wireless consumers is becoming even more pronounced. Across the country, cities have been rewriting utility regulations to expand the list of taxable wireless services. And some cities have successfully persuaded courts to impose new “business license taxes” on wireless services at rates as high as 10 percent. (By comparison, other business license taxes are typically about one percent.)
From a public policy perspective, this rush to tax is profoundly disappointing. First, the government is supposed to use taxes to discourage behavior. There are cigarette taxes to deter smoking, especially among the young. Liquor taxes try to curb drunk driving and overdrinking.
But the development of cell phones and other services is one of the great successes in America’s economy, creating jobs and wealth. It also provides a lifeline for Americans without traditional phone service.
This rush to tax mobile consumers also discourages use of wireless broadband options that can be vital to expanding options for tele-work and reducing greenhouse emissions.
The bottom line: Wireless users already pay more than their share in taxes. Officials should stop adding to that burden.