NCPA - National Center for Policy Analysis

How Much Do Americans Pay in Cell Phone Taxes?

October 9, 2014

Americans pay 17 percent in federal, state and local cell phone taxes, according to a new study from Scott Mackey and Joseph Henchman of the Tax Foundation. On average, wireless customers pay states and local governments an average tax rate of 11.23 percent, in addition to a 5.82 percent federal tax rate.

Notably, the cell phone tax is twice the amount of taxes on other consumer goods and services, and some customers (in Washington, Nebraska, New York, Florida, Illinois, Rhode Island and Missouri) pay taxes worth more than one-fifth of their cell phone bill. The amount of taxes vary between states:

  • Washington (18.6 percent), Nebraska (18.48 percent), New York (17.74 percent), Florida (16.55 percent) and Illinois (15.81 percent) impose the highest state and local wireless taxes.
  • Oregon (1.76 percent), Nevada (1.86 percent), Idaho (2.62 percent), Montana (6.00 percent) and West Virginia (6.15 percent) have the lowest state-local wireless taxes.

Mackey and Henchman explain that wireless taxes grew from 15.27 percent in 2005 to 17.05 percent today, meaning that the cell phone tax grew three times faster than did taxes on other goods and services.

These taxes cover a number of things, including 911 services.  States vary widely in the fees that they charge to fund their 911 services. Missouri does not charge a fee at all, whereas West Virginia customers pay $3 per month per wireless line to fund the service. Nationwide, the average is 75 cents per month per line.

Mackey and Henchman contend the wireless taxes disproportionately burden low-income families, the majority of which only have wireless phone service. Wireless service is critical in today's economy, they write, and increasing wireless taxes could have negative ramifications. They note that a 1 percent increase in wireless service reduces demand for the service by 1.2 percent.

Source: Scott Mackey and Joseph Henchman, "Wireless Taxation in the United States 2014," Tax Foundation, October 8, 2014.


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