Tax Analysts Blog

Taxing Teen Texts and Other Terrible Tax Things

Posted on Jul 10, 2013

I wish someone would tell me the policy rationale for taxing wireless services. What is it about my ownership of a cell phone and the subsequent texting, tweeting, emailing, etc. that gives rise to punishing me? I get taxing traditional telephone service (for you younger readers, ask your parents what I am talking about). After all, there are some societal costs to making phone calls. There are telephone poles, and wires, and other trappings of a quainter time. Today, the real losers in the taxation of wireless services are parents. I do not think there is a teenager alive who does not use the twitter or facebook or vine or instawhatever on their wireless device. And, if my household is an indicator, all of those costs are incurred by parents.

The Tax Foundation released a great report recently on the state of state and local taxes and fees on wireless services. The first thing to note (and lots of folks forget) is that the federal government imposes a 5.82 percent tax on wireless services. Why? I guess it is because the federal government needs the money. I defy anyone to tell me another rationale. The good news is that Oregon (1.85%), Nevada (2.13%), and Idaho (2.28%) have the three lowest state and local wireless tax burdens. I applaud those states, although I am not sure what the rationale is for even very low wireless taxes.

Nebraska (18.67%), Washington (18.62%), and New York (17.85%) have the three highest tax burdens on wireless services in the nation. The highest taxing states are interesting. Well, New York is not interesting since everyone expects New York to tax the heck out of everything it can. But Nebraska has long been number one in taxing wireless services. Nebraska is a good old fashioned state that uses its tax on wireless services to ensure that traditional telephone landlines keep operating. At least that is what people in Nebraska tell me. You would think Washington, the home of a lot of high tech companies, would be a little more wireless friendly. I talked to a guy in Washington who said their high wireless taxes reflect the fact Washington has no income tax. So basically it’s all a money grab.

But, wireless taxes are regressive – and getting more so. Almost everyone uses wireless devices, well except in Nebraska. In addition to fat kids, skinny kids, and kids that climb on rocks, rich kids and poor kids use wireless devices. If everyone is using them, a flat tax is regressive. It is strange that liberal New York and Washington, states purportedly looking out for the little guy, are so enamored with a regressive tax.

Read Comments (2)

Pragmatic ProgressiveJul 9, 2013

I'm not sure why the wireless tax is so bad. Maybe the fact that it's a
targeted tax instead of a general sales tax on a service? Wireless
infrastructure is not free. The frequency bands used are a fixed size of a
fixed resource. It's not easy to make more frequency. Cell towers are still
needed and take up space. And there are possible health risks (i.e. costs).

I agree that 18% is egregious, but regarding the fact that there is a tax at
all, why should other services be taxed and _not_ wireless.

David BrunoriJul 10, 2013

Mr. Progressive,
My only issue is that the societal costs of wireless access (while certainly
not free) are generally borne by private parties. That is, Verizon, etc. sets
up cell towers and the costs are reflected in your service charge. If we are
taxing wireless services because that's where the money is, we should be
upfront about it. Thanks for writing.

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