How a Wireless Tax Bill Can Spread Holiday Cheer

By / 12.21.2012

Most of us would be lost without our cell phones, tablets, and other wireless devices.  We rely on them so much it’s hard to imagine how we could function without 24 hour access to Twitter, Facebook, and email. That means we are willing to pay up each month – for the service connection charge, one-size-fits-all data access plan, and all the taxes and fees that go with it.

And all of the wireless taxes and fees that go with it certainly add up – to about 17.2 percent of our monthly bill according to a new report by Scott Mackey. That’s up from 16.3 percent in 2010, a 5.5 percent increase in just two years.  Not a very festive thought during the holiday season.

But there is one tax bill currently in Congress that may spread some holiday cheer just yet. The Wireless Tax Fairness Act, if passed, would provide a five-year reprieve on any tax increases for our wireless service.  That means no new state or local government wireless taxes through 2018.

A five-year reprieve on wireless taxes would of let us keep more of our money to spend on other things, like an increase in income and payroll taxes after the fiscal cliff. Or on the next iPhone, since it will be obsolete by the time our eligible discount-for-contract-renewal-once-every-two-years comes up (and who wants to wait that long?).

It would also give the states and local governments that over-rely on wireless tax revenues a chance to figure out a better way to balance their budgets. Many tack on seemingly random “business” and “utility” taxes in addition to standard wireless taxes, as way to compensate for lost revenues from traditional wireline connections. The states that add the most fees to your wireless bill know how much we depend on our wireless devices. They count on our willingness (or complacency) to pay – our decreasing responsiveness to price from lack of feasible alternatives – to continually increase how much they collect. But wireless tax rates should be level with the general sales and use tax rates we pay for every other good and service we buy.

And the Wireless Tax Fairness Act would give a much needed reprieve to lower income groups, who are disproportionately impacted by wireless taxes. There are many studies that show poorer households spend more on wireless services as a share of total income than other income groups. And a 2011 CDC report found that while more households have switched to wireless-only service since the recession, adults living in poverty were more likely to have wireless service only. A five-year reprieve would help lower-income groups save more to spend on other essential items, while still having the internet access that is fast becoming an essential part of daily life.

Perhaps most importantly, it would send a signal to regulators and legislators on the federal, state, and local level that today’s high-speed data economy is not sufficiently handled by our increasingly outdated regulations and tax policies. Over taxing wireless services threatens to slow today’s biggest source of economic growth. That seems counter-intuitive.

That’s why, if passed, the Wireless Tax Fairness Act is a tax bill this holiday season worth cheering for.