Florida's wireless tax burden still among highest in country

Ever wonder why your cell phone bill is significantly more expensive than the price of the actual phone plan?

It’s mostly because of government taxes, fees and surcharges. Phone plans themselves have been getting cheaper.

Wireless industry competition has led to significant reductions in average monthly bills since 2008, but consumers aren’t seeing the benefits because of growing government-levied taxes and fees, according to the Tax Foundation.

The Washington, D.C., research institute released its seventh report in a series examining trends in taxes, fees and surcharges imposed by federal, state and local governments from 2003 to 2016. It calculates the 2016 national average rate to be 18.6 percent of a wireless customer’s bill – breaking last year’s record high.

“Taxes are growing at a rate twice as fast as average wireless prices have been falling,” the report states.

Average monthly bills have been declining since 2008 from just under $50 per month to $44.65 per month – an 11 percent reduction – while taxes and fees have increased from 15.1 percent to 18.6 percent – a 23 percent increase.

The report cites Florida as the only state to reduce its wireless tax in the past year. Mobile phones, cable and satellite television, and other wireless services saw a state tax reduction of 1.73 percent — a $200 million annual reduction.

The cut was part of a $400 million communications services reform package championed by Republican Gov. Rick Scott. As a result, Florida dropped out of the top five states with the highest wireless taxes.

Even so, Florida still has one of the highest burdens in the country.

The Tax Foundation analysis ranks the Sunshine State 8th highest among states in 2016, with a 14.7 percent combined state and local tax burden. When adding the mandatory federal Universal Services Fund surcharge of 6.64 percent, Floridians end up paying 21.34 percent – or one of every five dollars – of their total wireless phone bills to the government.

Among high-tax states, Florida and Illinois are unique in that they have communications taxes allowing local government add-ons that result in rates twice as high as the average state and local sales tax. In Florida, the combined average sales tax is 7.25 percent; the state and local wireless rate is 14.7 percent.

The Tax Foundation calls the disparity between wireless taxes and sales taxes that apply to other goods and services a “longstanding argument for reform.”

“Florida took a step in the right direction by reducing the Communications Services Tax in 2015, but wireless tax rates there are still well above the sales tax,” the report concludes.

In recent years, the federal USF surcharge has accounted for a larger portion of the overall national increase in taxes and fees. The surcharge is administered by the Federal Communications Commission and it subsidizes telecommunications services for schools, libraries, hospitals, low-income individuals and rural phone companies.

The FCC decides how much to spend on these services and charges telecommunications companies a “contribution factor.” The companies then pass the charges onto their wireless customers.

Wireless consumers paid an estimated $17.2 billion in taxes, fees, and government surcharges last year.

• $7.0 billion in sales taxes and other consumption taxes.
• $5.1 billion in federal Universal Service Fund surcharges.
• $2.5 billion in 911 fees.
• $2.6 billion in state and local taxes, fees and surcharges.

Wireless service is increasingly the sole means of communication for many Americans, particularly those with lower incomes, the report states.

According to the Centers for Disease Control and Prevention, 64 percent of all low-income adults rely exclusively on cell phone usage, as do about half of all American adults.

“With state and local governments continuing to face revenue challenges, the wireless industry and its customers continue to be at risk as an attractive target for raising new revenues,” the Tax Foundation concluded.

Tags: Telecommunications