Cell Taxes and the Black Market

June 8, 2005

Telecom taxes are increasingly becoming an area of tax policy that is under scrutiny for being complicated, punitive, and unfair. Taxes perceived as unfair generate greater incentives to avoid the tax. For example, a reporter from Forbes Magazine describes how he avoids high cell phone taxes (for full article click here):

Since it was clear I’d have to lose my coveted New York number to avoid Verizon-levied taxes, I changed to an Idaho number, provided an Idaho address, then promptly turned around and requested paperless billing, which I paid from my Los Angeles address. Since my fake move, my monthly bill has shown a tiny Idaho tax of about $1.15 per month. At that rate I figure I am saving about $60 per year.

The incentive to avoid taxation is increased when the complexity and rate of a tax increase. Cell phone taxes are not the only taxes which drive people into the black market. High cigarette taxes, for example, do as well. Improving technology makes borders more artificial and provides further incentives for people to avoid high or complex taxes. Read the Tax Foundation’s new paper by Dr. Richard Wagner on how technology is making borders weaker to learn more.

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