My latest Forbes column notes how “Taxes On Talking Are On the Rise Across the U.S.” with levies on mobile phones and devices skyrocketing. I build my argument around data and arguments found in Dan Rothschild’s excellent recent Mercatus Center paper, which makes “The Case Against Taxing Cell Phone Subscribers,” as well as an important recent study by Scott Mackey, an economist and partner at KSE Partners LLP, which documents the growing burden of these wireless taxes and fees.
“Wireless users now face a combined federal, state, and local tax and fee burden of 16.3%, a rate two times higher than the average retail sales tax rate and the highest wireless rate since 2005,” Mackey finds. Mobile tax rates range from a high of 23.7% in Nebraska to a low of 6.9% in Oregon. 48 states have an average combined wireless tax rate above 11%. These burdensome taxes on talking just don’t make any sense, argues Rothschild. “There is no economic justification for these high tax rates: reducing cell phone ownership is not a public policy goal, cell phone use by one customer does not affect other customers or other people, and these taxes fall disproportionately on lower-income households.”
You can read my entire essay here, but also make sure to re-read Dan Rothschild’s guest post here at the TLF on the issue. It’s much better than my own treatment. For me, the key point is this: If the primary policy goal in this arena is to build out a first-class communications and data infrastructure and make sure all Americans have access to it, discriminatory taxes on wireless services and networks are highly counter-productive. Policymakers should hang up on the Talking Tax.