[The following essay is a guest post from Dan Rothschild, Managing Director of the State and Local Policy Project at the Mercatus Center at George Mason University.]
As cell phone ownership has tripled in the United States over the last decade, policymakers have increasingly seen mobile devices as a cash cow. In some states, consumers now pay as much as a quarter of their cell phone bills in taxes. And while state revenues are beginning to tick back up from their low point during the recession, Medicaid costs are fast on their tails. So it’s likely that over the coming years, states will be looking to find taxes to hike or new taxes to create — all without calling them tax hikes, of course.
Policy makers may be tempted to hike taxes on cell phones, or to create (or “equalize”) taxes on untaxed (or “under taxed”) parts of wireless telephony, such as cell phone data plans or e-readers with cellular connections. As I argue in a recent issue of Mercatus on Policy, this is a bad idea for a number of reasons. Continue reading →