Bridge Span 13-6: Time for Wireless Tax Fairness

According to the National Broadband Map, as of June of last year, 99.8% of the population of the U.S. has access to wireless broadband.  The population covered by wire line access is 96.5%.  Saturation.

Adoption of broadband has been a bit different, uptake being around 70%.  One of the reasons cited by individuals for not subscribing to broadband is the cost.  An important factor in that total cost are the egregious, and ever escalating, state and local taxes.

In 1998, Congress saw that states were about to begin a tax binge on Internet access and attempt to layer on multiple or discriminatory taxes on anything to do with the Internet.  In response, and given its power in speaking to interstate issues, it passed the Internet Tax Fairness Act that protect against states taxing “the Internet.”

These days, as the numbers and simple observation show, people don’t run home to their personal computers to get online.  Instead they reach into their pockets, their purses or flip open their tablet accessing the broadband that they carry with them.  State tax authorities seized the opportunity, taxing telecommunications services via monopoly-era utility taxes causing tax rates on mobile “phones” to skyrocket.  Nationally, the average tax rate on wireless service is now at extortion levels of 17.2%, or 132% higher than the 7.4% average sales tax rate imposed upon other goods and services. 

And if the past is prologue the situation will only get worse, given that the effective rate of taxation on wireless services has increased three times faster than the rate on other taxable goods and services — a clear case of discriminatory treatment.

But that is not even the worst of it.  Specific localities are pushing the tax limits to new extremes.  For example, Baltimore City first imposed a $3.50 per line per month charge on inner city residents and now has increased the fee to $4.00.   Montgomery County, Maryland has increased their flat fee per wireless line from $2.00 to $3.50.  Some states even go for a double dip by charging a sales tax and then adding a 4% or 5% gross receipts tax on wireless services.  Others are simply disingenuous.  Wisconsin targeted wireless consumers to bear an additional monthly fee of $.75 labeled the “police and fire protection fee” even though the money solely goes to general revenue.

In sum, across the country mobile devices are taxed at obscene levels, driving up costs and driving down adoption with taxes higher than states place on pornography, alcohol or gambling winnings.   As they were in 1998, Congress has been compelled to act.

The Wireless Tax Fairness Act (H.R. 2309) was introduced this week in the U.S. House.  The Act would set in place a five-year moratorium on new or increased taxes on wireless telecommunications infrastructure and services.   More varied and efficient communications is the goal, communications of all sorts including voice, video and data.

If we are to truly achieve a national goal of greater broadband adoption, then states and their greedy tax policies cannot be allowed to discriminate against wireless communications.

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