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Policy

2:00pm March 19, 2011

State, Local Governments Picking the Pockets of Wireless Consumers

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Recently, I visited my family who live back east.  Whenever I’m home, I play the part of tech consultant for my Mother.  This trip was no different. On the docket:  set up her web cam so she can check in on me daily and disconnect her land line and switch her to a new cell phone provider.

Well, the webcam was easy enough, but as one who is keeping up with this debate on excessive wireless taxation, I couldn’t in good conscience advise her to completely give up the landline.  Not yet.  Not with wireless taxes continuing the steady, un-checked climb.

In a recent report entitled “A Growing Burden: Taxes and Fees on Wireless Services” released by Scott Mackey of KSE Partners, Mackey notes that wireless users now face a combined federal, state, and local tax and fee burden of 16.3 percent, a rate two times higher than the average retail sales tax rate and the highest wireless rate since 2005.

Wireless taxes are north of 20% for Florida, Washington and New York; most shocking is Nebraska coming in with the highest wireless taxes: 23.7%!

While, North Carolina isn’t as bad, I still couldn’t advise my Mom, or any of her friends, to ditch the landline until we are assured a ceiling will be put in place to end all of this tax madness.  At this rate it will be more costly to have a cell phone than a landline.

These taxes are particularly hurtful for families too poor to afford both a cell and a landline.  When forced to choose, these families go with the cell phone because of mobility and accessibility to the Internet.

Fact: 17% of families earning less than $30,000 rely on a cell phone to access the Internet.

Many of the families that make up this 17% are African American families.  Melanie Campbell, President and CEO of the National Coalition for Black Civic Participation, in a recent teleconference on broadband and how it empowers minority communities, such as women, African Americans and those living in rural communities, stated:

Wireless technology helps bridge the digital divide for many African Americans. With wireless tax rates more than twice those of other goods and services, it adversely affects many African Americans who use this technology as an on-ramp to the Internet. African Americans are disproportionately impacted by the excessive taxes placed on wireless services and goods, as we are the largest consumers of wireless products and services. That is why it’s important that consumer-friendly policies be developed to address the disparate rules around wireless taxation.

My Mom wanted to know why these taxes are so ridiculously high.  From the Bible Belt, we joked perhaps the FCC, Fed & local governments view cell phone use a vice.  After all only alcohol and cigarette sales are plagued by similar tax fixes.

Fact: a pack of smokes costs about $5, on top of which state tax will add, on average, $1.45. That’s an average tax rate of 22 percent – a tad less than wireless taxes in Nebraska.

In actuality, levying burdensome taxes on wireless consumers is a sneaky, under the radar way in which state and local governments can try to solve their budget issues.

From the report:

Local governments in a few states have been aggressive in levying new taxes on wireless users as the recession has stressed revenue collections from property and other broad-based taxes.

While my Mom only wanted to consolidate and rid herself of duplicitous services, others rely on the cell phone as their only means of communication and as their only access to the world wide web. If we are going to ensure all Americans have access to the Internet then we must ensure states and local governments do not have the freedom to keep picking the pockets of wireless consumers.



About the Author

E.R. Barnette
E.R. Barnette
Prior to joining Politic365, E.R. Barnette spent nine years with Procter & Gamble. Barnette has a rich, diverse background in sales analytics as well as merchandising & marketing of Fortune 500 brands. Barnette has a Bachelor of Arts from the University of North Carolina - Chapel Hill in Communications/Media Production.




 
 

 
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3 Comments


  1. John_Q_Public

    Bravo! Thank you for writing about this critical topic. In the race to fill coffers, policymakers may be inadvertently handcuffing innovation and competition in a vital sector. Reform is needed to rationalize and harmonize tax rates not only for wireless service but also for the wider array of digital goods and services.


  2. [...] in the month, we reported on the ever-increasing taxes on mobile devices and services consumers are forced to pay.  In doing so, we highlighted a report by economist Scott Mackey, of [...]


  3. [...] an article published earlier this year, Politic365 highlighted pending legislation on the wireless service taxation issue. Known as the [...]



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