Roaming With...Wireless Taxes: Why They Matter to the Entire U.S. Economy
                                                                                                By Scott Mackey

The wireless industry and its customers have been complaining for years about the excessive and discriminatory taxes and fees imposed on wireless service by federal, state, and local governments. While most policymakers understand the direct impact of these taxes and fees on consumers, many lack a full understanding about the indirect impact of excessive wireless taxes on the broader economy.

The wireless industry plays a critical role in the U.S. economy because of its beneficial impact on the productivity of businesses. A 2005 study by Ovum and Indepen found that the information technology, computers and telecommunications
sectors — of which wireless technology plays the leading role — were responsible for 80 percent of the productivity growth in the United States in 2004. Productivity is simply a measure of output per worker, and strong productivity growth generates important economic benefits. It boosts incomes, living standards, capital formation, and overall economic growth. In the late 1990s, rapid productivity growth due to the emergence of the Internet and electronic commerce was widely credited with fueling the robust economic expansion.

Today it is wireless networks and applications that are major drivers of  productivity growth. Tax and regulatory policies that promote investment in robust wireless networks and applications will generate important economic benefits. Conversely, policies thatincrease the cost of investment or otherwise slow investment in wireless technologies will delay important economic benefits.

This is where federal, state, and local taxes and fees come into the picture, and unfortunately it is not a pretty picture. The average U.S. wireless customer pays 16.9 percent in taxes, fees, and charges on their wireless bill. This means that a $50 monthly calling plan actually costs the average customer $58.50.

There is ample evidence that wireless consumers are price sensitive, especially now that adoption of wireless technology cuts across the entire income spectrum. Wireless consumers respond to tax-induced increases in the price of wireless service by reducing purchases of wireless service below the levels they would purchase in the absence of excessive taxation. This is particularly true with purchases of additional features and services, such as ring tones, text messages, and other digital products. Consumers may also respond by purchasing a lower-priced monthly plan, although such changes are less frequent due to long-term contracts prevalent in the post-paid wireless market.


The average U.S. wireless customer pays 16.9 percent in taxes, fees, and charges on their wireless bill. 

 


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