Wireless tax rates have reached all-time highs. Almost half of the states nationwide now impose a wireless tax above 10 percent (pushing the national average to more than 16.3 percent). Even as revenue earned per wireless phone falls, taxes and fees climb.
In order to combat these increasing taxes, Reps. Zoe Lofgren (D-CA) and Trent Franks (R-AZ) reintroduced the Wireless Tax Fairness Act in June. The Act creates a five-year moratorium on discriminatory state wireless phone and data service tax increases. While the moratorium will not prevent governments from creating new taxes and fees on all communications, it will disallow them from targeting any one service.
This is a positive step away from what has been a non-stop trend of wireless tax increases. There are two primary benefits from the five-year freeze. First, the moratorium slows the rate of tax increases. Second, the Act allows state and local governments more time to create a new taxing system for wireless that is more carefully developed, fair, and non-disruptive.
In response to the reintroduction of the Wireless Tax Fairness Act, a coalition of free-market and conservative organizations released a letter to members of Congress to co-sponsor the Act. The coalition argued wireless taxes have begun to grow at a reckless rate and Congress has both the power and responsibility to combat these overly burdensome taxes.
Excerpt from the coalition letter:
“Wireless taxes are significantly higher and more regressive than general sales taxes, which average about 7 percent. The average wireless tax, on the other hand, has skyrocketed to 17.2 percent and in some parts of the country, the combined federal, state and local rate exceeds 25 percent.
A federal solution to curbing wireless taxation is needed, now. This is a legitimate use of Congress’ commerce clause power because few markets are more interstate in nature than wireless services, thus Congress has the power to limit states’ ability to impose burdensome taxes. The five-year freeze on wireless taxes is a pro-consumer, pro-business, pro-taxpayer, and bipartisan solution to this growing problem. During the five-year timeout interested stakeholders could work collaboratively to come up with a telecommunications tax system that would provide the appropriate levels of tax revenue to state and localities, but keep important wireless services affordable.”
High wireless taxes drag down both consumers and the wireless market, deterring innovation and infrastructure improvements, while disproportionately affecting minority and low-income populations. Wireless taxes have skyrocketed in recent years; placing a moratorium on these discriminatory tax hikes would benefit both the economy and consumers. Congress should seriously consider the Wireless Tax Fairness Act, before high taxes make wireless services less accessible for everyone.