Taking Their Toll
Is Excessive Taxation Penalizing Wireless Consumers for Embracing Technology?
By Mary Lou Jay
If people had to pay a 24 percent sales tax on every new car purchase or a 22 percent tax when they bought a new washing machine, it wouldn’t be long before they were angrily demanding that legislators do something about such excessive taxes. What many people don’t realize, however, is that they may already be paying such exorbitant rates every month on their wireless service.
The average general sales tax in the U.S. today is around six percent, but the average wireless consumer currently pays about 17 percent in taxes and fees. “Wireless customers are subject to taxes and fees much higher than those imposed on other goods and services,” says Scott Mackey, an economist and principal with Kimbell Sherman Ellis in Montpelier, VT. “Wireless companies are not opposed to taxes in principle, but,” says Mackey, “they do object to wireless customers being singled out for specific, excessive telecommunications or wireless taxes.”
The combined burden of state, local and federal taxes and fees can be as high as 24.63 percent (in Nebraska). “Between January 2003 and April 2004, wireless taxes grew nine times faster than that of general business,” says Jim Schuler, CTIA Assistant Vice President, Policy. “As the industry is reducing prices, because the technology is more efficient and less expensive, state and local governments are raising the cost of service because taxes are going up.”
It’s ironic, he adds, that wireless customers are paying such high rates. “At 15 to 20 percent, that’s close to the level of sin taxes, which are intended to discourage use of a product. But today, mobile communications is a backbone of business. Why would you discourage the use of wireless at a time when communications and mobility are so important?”
