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Why are wireless consumers paying twice as much in taxes and fees?

Tue, 02/15/2011 - 5:58am
WASHINGTON, /PRNewswire-USNewswire/ -- Tax policy expert Scott Mackey recently released “A Growing Burden: Taxes and Fees on Wireless Service,” a new report examining the excessive burdens on wireless consumers and highlighting the need for meaningful communications tax reform.

More than eleven years ago, the National Governors Association (NGA) and the National Conference of State Legislatures (NCSL) called upon states to reform, modernize, and simplify the taxation of the telecommunications industry. Most states have failed to enact meaningful reforms. In fact, many have continued to target wireless consumers for additional taxes. The effective rate of taxation on wireless service increased three times faster than the rate on other taxable goods and services between 2007 and 2010, saddling wireless consumers with billions in costs.

"The wireless industry and its customers are willing to pay their fair share of taxes, but it is unfair for wireless consumers to pay rates two times higher than rates on other taxable goods and services," said Mackey. "There is no sound policy reason to tax wireless and other communications services at these high rates.  In fact, at a time when the President, Governors, and business leaders are calling for expansion of wireless service to improve productivity, these excessive taxes actually discourage business and consumer purchases of wireless service and reduce the availability of funds for network modernization."

The study found that consumers in 47 states now pay wireless taxes, fees, and government charges that exceed the general retail sales tax rate. The average consumer pays over 16 percent of their wireless bill in federal, state and local taxes, fees and surcharges. For other goods and services, the average tax rate is only 7.4 percent.

Wireless tax rates in many states have hit double digits, with some states double taxing consumers by imposing a gross receipts or excise tax on wireless communications in addition to the general sales tax.

  "Consumers who rely on basic communication services – typically lower-income consumers – are the ones most harmed by excessive wireless taxes, which are very regressive," continued Mackey. "Reform of these antiquated tax systems would lower costs to businesses and consumers, expand the use of advanced wireless services, and help create jobs by making the American workforce more productive.  Reform of wireless taxes would also expedite the build-out of advanced wireless networks."

The paper, “A Growing Burden:  Taxes and Fees on Wireless Service,” can be viewed on the KSE Partners LLP web site at http://www.ksefocus.com/wordpress-content/uploads/2011/02/2010-Tax-Study-Final-Tax-Notes-PDF.pdf

Scott Mackey is a national tax policy expert and Partner at KSE Partners. Mackey is the former Chief Economist at the National Conference of State Legislatures where he spent 10 years working with legislative leaders on critical state issues like the taxation of electronic commerce and telecommunications tax reform. He has testified before legislative committees in 17 states and has been quoted in major media outlets like CNN, the New York Times, the Wall Street Journal and USA Today.

SOURCE: KSE Partners

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