| November 29, 2012

Top 5 surprise facts behind your cell phone bill

Two days ago, I arrived at work only to discover that I'd left my cell phone at home. Without it, I felt bereft, ineffective and, naturally, disconnected. The paranoia that I might just miss an all-important phone call grew so acute that, by lunchtime, I felt compelled to drive home to retrieve it. Point is: I value my phone -- and am willing to pay for reliable cell phone service.

Still, I was a little disconcerted when a fascinating infographic about wireless taxes and fees crossed my desk. So much I didn't know about the wireless industry, including the following:

1.) The average American wireless consumer pays more than 17 percent in taxes and fees -- or more than double the general sales tax rate for other taxable goods and services.

That's up from 2010, when the average American paid 16.26 percent in wireless taxes and fees. In the past 10 years, state houses and the FCC have increased the burden for wireless at more than four times the rate they've increased the burden for other goods.

2.) At 17.30 percent, Oklahomans' combined federal-state-local tax-and-fee rate on wireless services is the 19th highest in the country.

The good news: In 2010, Oklahoma ranked 17th. The bad news: In 2010, Oklahomans faced a lower -- albeit still high relative to the general sales tax rate -- combined federal-state-local rate of 15.79 percent.

3.) Want to be taxed by four different states at once? There's an app for that.

The Mobile Telecommunications Sourcing Act of 2002 determined that a cell phone subscriber is liable for cell phone taxes only in his or her "place of primary use" as determined by the cell phone company -- but a wireless customer who downloads a mobile phone app while out of town could still be liable for taxes in multiple states.

4.) Cell taxes and fees are often hidden. Call 'em "stealth taxes" if you like.

The Tax Foundation's Joe Henchman explains:

States favor the taxes because they can raise revenue in a relatively hidden way. Texas even sued Sprint because the company listed a state tax as a line-item in its bill, rather than hiding it from customers. Utah uses a wireless fee to fund its poison control centers -- a government service that benefits the general public regardless of cell phone ownership or usage. Six states (Kentucky, Indiana, North Dakota, Pennsylvania, Rhode Island and South Dakota) impose both sales taxes on wireless customers and gross receipts taxes on wireless service providers, both of which are ultimately borne by customers. Universal Service Fund (USF) charges are modest in most states but particularly excessive in Nebraska and Kansas, where they exceed 4 percent of the wireless bill. ...

As a result, cell phones are taxed at a much higher level than other consumer items, even as much as or more than alcohol or cigarettes.

5.) Last year, the House of Representatives passed -- but the Senate failed to pass -- the "Wireless Tax Fairness Act," which would impose a five-year freeze on any new state and local wireless taxes and fees.

Given our unwavering support for federalism, we're confident Oklahoma policymakers could craft a state-based solution to excessive taxes on wireless services -- and, in the process, prove that a tax rate that is more in line with the general sales tax rate helps to ensure affordable broadband access for more people. No doubt whatever the state takes off the top of our cell phone bills is immediately plunged into a government service that someone in Oklahoma considers "core" -- or, at the very least, worthwhile -- but, as Henchman puts it, singling out a single product for stealth taxes "distort[s] market decisions and risk[s] slowing investment that contributes to economic growth."

It's also important to note that, like the energy industry, the wireless industry yields an impressive number of good jobs. The wireless industry directly or indirectly employs more than 3.8 million Americans, which accounts for 2.6 percent of all U.S. employment. In addition, wireless employees are paid 65 percent higher than the national average for other workers, according to the website of the wireless trade organization CTIA -- The Wireless Organization.

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