Tax Foundation Reports on Overtaxed Wireless Consumers, Including in Maryland

On November 13, the Tax Foundation released a report titled "Excise Taxes and Fees on Wireless Services Drop Slightly in 2023." It is the 14th edition of the Tax Foundation’s report on taxes, fees, and surcharges imposed by federal, state, and local governments on wireless services. According to the report, "Nationally, taxes, fees, and government surcharges make up a record-high 24.5 percent tax on taxable voice services.” Also, the report found that since 2012, the average charge from wireless providers decreased 26%, from $47.00 per line per month to $34.56 per line, yet wireless taxes, fees, and surcharges increased from 17.2% to 24.5% of the average bill.

The Tax Foundation's report helpfully describes the multiple types of taxes, fees, and surcharges that different governments impose on wireless services, and offers breakdowns and rankings for different states. Among the states, the report found that the state of Maryland had the 11th highest wireless tax rate at 15.91%. And presuming an effective federal USF tax rate of 10.83%, the result is that Maryland residents are hit with a combined federal/state/local tax rate of 26.74% on their wireless service bills. As the report observes, tax rates for wireless services in many states are significantly higher than general sales tax rates.  Maryland had the 7th highest disparity between wireless taxes and general sales tax, as Maryland's 15.91% tax rate for wireless services is much higher than the state's general sales tax rate. 

 

Rightly, the Tax Foundation's report identified serious policy problems that arise from state and local governments singling out wireless services for higher tax, fee, and surcharge burdens. The financial burdens fall the hardest on low-income consumers, many of whom live in wireless-only households for Internet access. And high taxes can harm private sector investment in wireless network infrastructure. Also, the goal of tax policy ought to be collection of revenues. To that end, tax laws should ideally be neutral toward consumer activity. It is a misuse of tax laws to target or try to change specific behaviors.

 

By shedding light on the problem of wireless over-taxation and ranking the states with the biggest wireless tax addictions, the Tax Foundation has provided an important public service. Maryland and other states should reform their tax policies and cut their taxpayers a break.