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Feds May Act on Stealth, Burdensome Taxes on Cell Phones

1 min readBy: Joseph Bishop-Henchman

A recent Wall Street Journal editorial discussed the rise of heavy cell phone taxes:

A recent analysis by economist Scott Mackey in the journal State TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Notes shows that the average monthly tax burden on wireless customers is more than 15% – double the average sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. burden. In some states, such as New York (big surprise), the total tax bite is more than 20%.

The topic is in the news because presidential candidate Sen. John McCain (R-AZ), and Reps. Zoe Lofgren (D.-CA) and Chris Cannon (R.-UT) have called for a moratorium on new cell phone taxes.

We scrutinized cell phone taxes in this piece, concluding:

Making cell phone calls nationally may be getting easier, but paying cell phone taxes is not. State and local governments should not single out one product for stealth tax increases, as they are doing with cell phones. Such actions distort market decisions, violating the sound-tax-policy principle of neutrality. Cell phone users are often overtaxed relative to consumers of other goods, and at risk of double taxationDouble taxation is when taxes are paid twice on the same dollar of income, regardless of whether that’s corporate or individual income. . Finally, the wide number of taxing authorities and the wide variety in rates makes tracking problematic and burdensome.

More here.