- The Washington Times - Tuesday, February 22, 2011

ANALYSIS/OPINION:

According to a new study by economist Scott Mackey, the average U.S. wireless subscriber pays federal, state and local taxes on cell-phone bills totaling 16.3 percent, compared to 7.4 percent in sales taxes on other goods and services. In fact, the tax rate on wireless end users is higher than sales taxes in 47 states and the District of Columbia. Among the worst offenders with these discriminatory taxes are the states of Nebraska, Washington, New York, Florida and Illinois, where the combined taxes on cell phones exceed 20 percent. Who said talk is cheap?

The taxes include fees imposed on wireless services that are used to subsidize outdated wired telephone services. In other words, these taxes discourage investments and job creation in high-tech service infrastructure in order to prop up services that increasingly are in decline. Moreover, because these services are relatively price-sensitive, increased taxes lead to a declining tax base. This also means that taxing wireless services lowers consumer spending in wireless and broadband services. Oddly, some of these wireless taxes supposedly are collected for E911 services and fire protection, but are then used for other purposes or just added into the general fund. Why would we want to discourage use of these advanced services?

Wireless services are not an evil scourge deserving excessive taxation. For a growing segment of consumers, particularly young and lower-income consumers, cell phones and wireless broadband are their sole means of telecommunications with friends and family as well as contacting community services, finding jobs and calling E911. With that in mind, it is time for policymakers, particularly at the state level, to end discriminatory taxes that disproportionately affect these lower-income and younger Americans. Don’t tax what you want to encourage.

STEVE POCIASK

President, American Consumer Institute, Center for Citizen Research

Washington


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