The U.S. wireless industry is one of the primary drivers of the American economy, and the quality of wireless broadband is increasing as the price of service decreases. The International Chamber of Commerce (ICC) consistently found that wireless infrastructure investment enables an entire entrepreneurial culture to focus on creating applications and devices to make businesses more productive and improve consumers’ lives. From 2010-2020, the price of wireless service decreased. Mobile wireless providers served consumers with 108 times more mobile data and download speeds 31 times faster. Since 2012, the average per line charge by wireless providers decreased by 24 percent, from $47.00 per month to $35.74.
According to a recent report from the Tax Foundation, a significant portion of the average consumer's wireless bill is comprised of taxes, fees, and government surcharges rather than the actual charges for the service provided. Taxes and fees on the typical American wireless consumer increased again in 2022, to a record 25.4 percent of the taxable (voice services) portion of a typical monthly bill. This total includes state and local taxes averaging 13.2 percent and the Federal Universal Service Fund (FUSF) surcharge rate of 12.2 percent. State and local taxes and fees fell slightly from 2021 to 2022, but this drop was offset by a FUSF rate increase from 11.8 percent to 12.2 percent. In 2022 wireless consumers paid $11.2 billion in taxes, fees, and government surcharges to state and local governments. About half of those taxes are discriminatory in nature in that they only apply to telecommunications services rather than goods and services more broadly.
But the ongoing decrease in the charges for wireless services is negated to some extent by the increase in wireless taxes, fees, and government surcharges. Since 2012, while wireless prices were decreasing, wireless taxes, fees, and government surcharges increased from 17.2 percent to 25.4 percent of the average taxable portion of wireless bills.[8] According to the Tax Foundation's most recent data, Illinois has the highest tax (23 percent) and Idaho has the lowest (2.8 percent). 52.2 percent of total wireless service revenues for the industry are from the sale of Internet access. The decline in the price of telecommunications service, combined with the shift in consumer purchases from telecommunications services to Internet access, has forced the Federal Communications Commission to increase rates just to keep revenues constant, as seen with the FUSF surcharge increases. To maintain USF support at current levels, the surcharge rate likely will continue as wireless consumers utilize more Internet access and less voice telephone service each year.
These increasing taxes, fees, and surcharges on consumers wireless bills disproportionately impact lower-income Americans. These taxes are regressive in the sense that they impose higher wireless charges on low-income consumers than on high-income consumers, measured as a percentage of income.
PS – A hat tip to FSF intern Naomi Singer for her assistance on this post.
Posts
