Americans pay an average rate of 17 percent in combined federal, state and local taxes and fees on wireless service, according to a new study from the Tax Foundation, a nonprofit, Washington, D.C.-based think tank. The group said the figure comprises a 5.82 percent federal rate and an average 11.23 percent state-local tax rate.
According to the report, that combined rate of 17.05 percent is down slightly from the rate of 17.18 percent in 2012. The foundation reports that wireless tax burdens fell between 2005 and 2006 following a series of federal court decisions that forced the Internal Revenue Service to stop imposing the 3 percent federal excise tax on wireless service. However, since then, rates climbed steadily until the slight drop in 2014.
The report found that the highest combined wireless tax rates are in Washington State at 24.4 percent, followed by Nebraska at 24.3 percent, New York's 23.6 percent, Florida at 22.4 percent and Illinois at 21.6 percent. The lowest combined rates are in Oregon at 7.6 percent, Nevada at 7.7 percent and Idaho at 8.45 percent.
According to the Tax Foundation, federal, state and local average tax rates are generally higher than sales tax rates.
The Tax Foundation has published similar reports before, in 2004, 2008, 2011, and 2012. The firm's studies use methodology developed in 1999 by the Committee on State Taxation, now the Council on State Taxation. Instead of aggregating tax rates from the more than 10,000 taxing jurisdictions across the country, the COST study used an average of the most populated city and the capital city in each state as a proxy to compare tax rates across the states. The Tax Foundation says this methodology allows for time series comparisons of trends in wireless taxation.
CTIA has perennially lobbied Congress to impose moratoriums on new state and local wireless taxes. CTIA spokeswoman Amy Storey told FierceWireless that the wireless trade group did not fund the new Tax Foundation study.
However, she did not confirm that the group has funded the Tax Foundation in the past. "Our consumer advocacy group, MyWireless.org, does give annual general support sponsorship to Tax Foundation," she said. Story said MyWireless.org gave the Tax Foundation $10,000 for general support in 2014.
According to the foundation's website, in 2013 it received a total of $3.02 million in revenue: 40 percent from philanthropic foundations, 37 percent from corporate contributions, donations from more 1,600 individuals (12 percent) and events revenue and miscellaneous (11 percent). The Tax Foundation has received funding in the past from the conservative-leaning Koch Family Foundations and Earhart Foundation.
The Tax Foundation is an advocate for lower taxes, and certainly for lower taxes on wireless service. "Congress is currently considering legislation to extend the federal moratorium on state and local taxes on Internet access. The taxes described in this report are, for the most part, imposed on wireless voice and other taxable services, not wireless Internet access," the Tax Foundation noted in its report. "Should the moratorium not be extended by Congress, the excessive wireless taxes discussed in this report could be imposed on wireless Internet access. This could add significantly to the tax burden on wireless consumers."
The Tax Foundation also noted that "one of the longstanding arguments for reform of wireless taxation is the disparity in the tax burdens on wireless service as compared to the tax burdens on other goods and services subject to state sales and use taxes." The foundation said that only five states have lower rates on wireless service than their general sales tax rate. The states are Alabama, Idaho, Louisiana, Nevada and West Virginia.
For more:
- see this Tax Foundation report
- see this MarketWatch article
- see this Bloomberg article
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