Have you ever taken a look at your cell phone bill and wondered why there were so many taxes applied to your bill? For example, there’s a state tax, local government tax, surcharges, additional fees, etc. I’ve always wondered where all of the money from these taxes were going and how lower-income users were able to afford cell phones as wireless prices and taxes continue to rise.
Recently, the Pew Research Center’s Internet, Science & Tech Project released their report “U.S. Smartphone Use in 2015” which analyzed the use of smartphones in the U.S. particularly among communities of color. The report found that nearly two-thirds of Americans now own a smartphone and 19% of Americans rely on the smartphone for internet access. Along with lower-income users, African Americans and Latinos are around twice as likely as whites to have canceled or cut off their smartphone service and tend to subscribe to relatively low-cost plans covering only themselves as individuals rather than group or family plans. In addition, roughly one-third of African American and Latino smartphone owners experience much higher-than-expected monthly bills, at least on occasion, and about one-in-ten indicate that surprisingly high bills happen to them “frequently.” The fact that lower-income users are already struggling with wireless costs when they are heavily dependent on their cell phones for a wide range of services and content for daily life is disturbing.
Various organizations have called on Congress to pass the Internet Tax Freedom Act: legislation to ban Internet access taxes at the state and local levels, prevent states and localities from imposing multiple and discriminatory taxes on Internet commerce, ensure only one state can tax each transaction, and prevent online sales from being taxed at a higher rate than in-person sales. Currently, there is a temporary moratorium on Internet access taxes that has been extended over the years but Congress has yet to pass a permanent fix.
A perfect example of how taxes can cripple wireless adoption and use is being borne out currently by the Pennsylvania legislature, which has introduced a bill (H.B. 911) that would increase the state 911 fee on wireless service by 65%. If passed, there will be an annual $78 million fee increase on wireless consumers and a $114 million fee increase on all telecommunications consumers, adding up to a $570 million fee increase over five years. Similarly, Prince George’s County Executive Rushern Baker has proposed a budget for Maryland residents that include a 50% increase in the county’s Telecommunications tax. The proposed legislation would mean that families would pay an additional $360 per year in wireless taxes, and have a combined wireless tax and fee burden of 26% the cost of their bill, the second highest wireless tax rate of any jurisdiction in the U.S.!
For people of color generally, and members of low-income communities in particular, an increase in wireless taxation of the magnitude contemplated in Pennsylvania and Prince George’s County Maryland could render cell phone or smartphone usage financially impossible for some families. And considering that access to communications and the Internet via mobile devices is typically the only access that some people – especially members of vulnerable communities – have, the idea that our leaders would tax away the benefits of these technologies is untenable.
For more information regarding the Pew Research Center’s Study, please visit: Pew Research Center, April, 2015, “The Smartphone Difference” Available at: http://www.pewinternet.org/2015/04/01/us-smartphone-use-in-2015/