INSIGHTS: CELL PHONE TAXES AND FEES
New Tax Foundation Study Released: Americans Pay an Average of 17% in Cell Phone Taxes
U.S. wireless consumers pay an average of over 17 percent in taxes and fees on their cell phone bill, including more than 11 percent in state and local charges, according to a new analysis by the Tax Foundation.
In Nebraska, the combined federal-state-local average rate is nearly 24.5 percent, and in six other states (Washington, New York, Florida, Illinois, Rhode Island, and Missouri) it exceeds 20 percent.
“Accessing new sources of information on our mobile devices may be getting easier, but paying cell phone taxes is not,” said Tax Foundation Vice President for Legal & State Projects Joseph Henchman. “State and local governments should not single out one product for stealth tax increases as they are doing with wireless services.”
Included in the report, which uses recent data from a study by Scott Mackey of KSE Partners, are the following findings:
The average U.S. wireless consumer pays taxes and fees of 17.18 percent, of which state-local charges average 11.36 percent.
26 states have average state-local wireless taxes and fees in excess of 10 percent; with federal taxes, some cell phone subscribers pay more than 20 percent in taxes.
States favor the taxes because they can raise revenue in a relatively hidden way. For example, Texas sued Sprint because the company listed a state tax as a line-item in its bill, rather than hiding it from customers.
Cell phones are taxed at a much higher level than other consumer items, even as much as or more than alcohol or cigarettes. The highest sales tax in the country (combined state and average local rates) is 9.43 percent in Tennessee – the highest state and local rates for cell phone service are almost twice as high.
Among local jurisdictions, Baltimore, Maryland imposes a $4 per line per month tax on wireless users, on top of federal and state charges. Nearby Montgomery County, Maryland imposes a $3.50 per line per month tax. These per line charges are especially burdensome on low-priced “family share” plans.
“Scholars from across the political spectrum have criticized telecom taxes as burdensome, regressive, and stifling consumer choice,” said Tax Foundation economist Scott Drenkard. “In response to this problem, legislation entitled the Cell Phone Tax Moratorium Act, which would restrict excessive state and local wireless taxes, has been regularly introduced in Congress.”
ON THE ECONOMY: TAKING ON THE TRIBES
By John Dunham:
Managing Partner, John Dunham & Associates
Last year, we had the privilege to conduct a study examining the impact of high cigarette taxes in New York State on consumer sales patterns. While politicians in the Empire State have been crowing that their obscenely high excise taxes have reduced cigarette sales, they have failed to admit that they have, for the most part, simply shifted sales from New York state-taxed sources (like convenience stores) to non-taxed sources or to stores in other states. Our analysis suggested that rather than dramatically reducing cigarette consumption, the high taxes had succeeded in shifting about one-half of sales to other jurisdictions including Native American smoke shops, retailers located in other states like Pennsylvania, Ohio and Connecticut, internet stores, duty free shops, military bases and black market smugglers.
Our study presented its findings in a clear manner, and the assumptions and models were all presented in the methodology. The client put out a press release and made the entire report available on their website. In addition, I was available to discuss the findings and methodology with pretty much anybody who cared.
Earlier this month an article came out slamming me, suggesting that I was not only a shill for “Big Tobacco,” but also suggesting that my motivation in doing this was to stigmatize Indian country businesses in New York. It also suggested that I wrote this report not because I was commissioned to look at a real and legitimate problem, but rather because I was some sort of Republican Party shill and wanted to somehow denigrate the state’s governor.
I am always happy when attention is placed on me rather than on my work. Generally when someone suggests that I am some sort of industry shill, they are doing this because they cannot find any fault with the research. In this case, the article actually recognizes that the research comes to the same conclusion as a report commissioned by the St. Regis Mohawk Tribe – that cigarette taxes in New York are ridiculously high and these high taxes have unintended consequences. I found the comment that somehow my little research project for a state trade association was intended to bring down Governor Cuomo’s administration kind of laughable, and for the record, I am a fan of the Governor and think he has done a great job- especially considering the nature of politics in New York.
But I digress. As we wrote in our Manifesto last May, one should consider 7 points when determining whether or not a study is credible.
- Ensure that a detailed methodology is available
- Ensure that the data used in the study is obtainable
- Determine if the study was published
- Determine if the methods used in the study are sound
- Determine if the results are sensible
- Determine if the study can be reproduced
- Determine if the prose is hostile or particularly biased
In a political world, we all use studies and talking points to make our case; however, a study should not BE a talking point. Talking points represent the results of a study in order to make a case or an argument. They are by their nature biased and often can be quite shrill. But the study itself should be objective. It may support or discredit a particular point of view but it should do so honestly and without spite.
If the language in my study or its methodology suggests bias, then I apologize.
The Monthly Manifesto is published by John Dunham and Associates, 32 Court Street, Brooklyn, NY 11201 as a service to our clients and friends. For more information relating to the content or for a free consultation on how we can assist your company or organization with your issues please contact us at 212-239-2105, or at firstname.lastname@example.org.