The Case Against Taxing Cell Phone Subscribers

Federal, state, and many local governments tax cell phone subscribers at a variety of rates that almost always exceed tax rates on other goods and services. In some states, consumers now pay as much as a quarter of their total cell phone service bills to government entities.¹ And some local governments are aggressively increasing taxes and fees.²

There is no economic justification for these high tax rates: reducing cell phone ownership is not a public policy goal, cell phone use by one customer does not affect other customers or other people, and these taxes fall disproportionately on lower-income households. Governments at all levels should bring cell phone taxes in line with taxes on similar goods and services and avoid discriminatory taxes on new and emerging wireless communication products.

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1. The charges paid by users have a variety of names, including taxes, fees, charges, and surcharges. I refer to them collectively as taxes for simplicity's sake.
2. Scott Mackey, "A Growing Burden: Taxes and Fees on Wireless Service," State Tax Notes 14 (February 2011): 477.