NCPA - National Center for Policy Analysis


April 15, 2009

Eleven federal, state and city levies add as much as 33 percent to the cost of New Yorkers' cell phones, a Post analysis found.  A typical cell plan costing $49.99 a month comes with a total tax bill of $10.59 -- a 21.18 percent tax rate that helps give New York the fourth-highest cell phone taxes of any state.  And cheaper plans favored by the frugal and poor are taxed at higher rates.

For example:

  • Someone with a $29.99 T-Mobile Basic plan with 300 minutes pays $6.95 in taxes monthly, a rate of 23.18 percent, 2 percentage points above the typical city bill.
  • People trying to save money with multiline family plans are hit harder; federal, state and local taxes on a two-line Sprint plan costing $69.99 a month add up to $15.73, a rate of 24.25 percent, 3 points above the typical bill.
  • Sprint offers additional lines for $9.99 each; add $2.89 in state and city taxes and 42 cents in federal taxes, and each extra $9.99 line carries a tax bill of $3.32 -- a 33.20 percent rate, 12 percentage points above the typical bill.

Cell phone customers gripe that there's no justification for some of the fees, such as the state's $1.20-per-line, per-month 911 charge.  Responding to complaints that only a tiny amount of the tax went to 911 service, the Legislature voted this month to call it a "public-service fee" instead.

New Yorkers' cell phone levies include a 4 percent state sales tax, a 4.125 percent city sales tax, and three message transfer agent (MTA) -- the program responsible for receiving incoming e-mails and delivering the messages to individual users -- taxes that add up to .98 percent.  Most people never read the phone-bill fine print -- they just pay up.  That's exactly how elected officials like it, said Scott Mackey, an economist who tracks taxes for several cell phone companies and aided The Post's analysis.

"There's a tendency to feel no one is going to notice this little tax," Mackey said. "They can do this without a lot of pushback from their constituents."

Source: Bill Sanderson and Amber Sutherland, "Phone Taxes are Cell Hell; 'Insane' Gov't Grab in NY," New York Post, April 13, 2009.


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