US Wireless Users Face Excessive Tax Burdens

By Scott Mackey

Leonine Public Affairs and the Tax Foundation jointly released a new study detailing the numerous federal, state, and local taxes that appear on wireless bills in the United States. The study found that the average U.S. wireless consumer pays taxes and fees in excess of 18 percent on their wireless voice service — nearly two and a half times higher than the average sales tax rate paid on other taxable goods and services.

Wireless competition has led to significant reductions in the price of wireless service, with average monthly revenue per wireless subscriber falling from $44.65 per month in 2016 to $41.50 per month in 2017. Unfortunately, many wireless consumers did not enjoy the full benefit of this price reduction because of stubbornly high federal, state, and local taxes and fees.

Wireless taxes and fees vary greatly by state and local jurisdiction. Consumers in Washington pay the most – over 25 percent of the bill – while consumers in nearly Oregon pay the least at just over 8 percent. The map below shows how the states compare:

 

wireless-taxes-map

 

Other key findings from the report:

  • A typical American household with four wireless phones paying $100 per month for their wireless voice service can expect to pay about $221 per year in wireless taxes, fees, and surcharges – down from $223 in 2016.
  • Nationwide, taxes make up 18.5 percent of the average U.S. customer’s wireless bill. Washington has the highest wireless tax rates in the country at 25.58 percent, followed closely by Nebraska at 25.10 percent, New York at 24.64 percent, Illinois at 24.59 percent, and Pennsylvania at 22.32 percent.
  • Since 2008, average wireless monthly bills have dropped from just under $50 per month to $41.50 per month – a 17 percent reduction – while wireless taxes and fees have increased from 15.1 percent to 18.5 percent – a 22 percent increase.
  • Many states impose a much larger tax on wireless service than the sales tax imposed on the purchase of other goods and services. States with large disparities include Alaska (8.8 times), Nebraska (2.7 times), Pennsylvania (2.5 times), and Maryland (2.2 times).
  • At the end of 2016, over 66 percent of all poor adults had only wireless service, and 51 percent of all adults were wireless only. Excessive taxes and fees, especially the regressive per-line taxes like those imposed in Chicago and Baltimore, impose a disproportionate burden on low-income consumers. Chicago’s per-line tax increases to $5 per month per line as of January 1, 2018.

Leonine Public Affairs works with the major wireless carriers to shine a light on the excessive taxation of wireless consumers, with the goal of bringing wireless taxes in line with sales taxes applied to other taxable goods and services.

A copy of the full report is available here.