NCPA - National Center for Policy Analysis

All Those Telephone Taxes and Fees

September 18, 2002

City, state and local governments have imposed a jumble of taxes, fees and surcharges on telephone bills -- and increased existing charges in a quest for greater revenues. Federal regulators have let long-distance carriers add virtually any charges they want to a customer's bill. Customers are baffled by their wireless and long-distance phone bills and are beginning to complain, authorities report.

  • California imposes the most taxes on wireless bills -- 19.6 percent of customers' total bills.
  • Florida, Virginia, New York and Nebraska aren't far behind.
  • Driven by competition, carriers have managed to cut wireless phone rates by 8 percent a year over the last four years, but wireless taxes have risen 12 percent on the average bill, according to the Cellular Telecommunications and Internet Association (CTIA)
  • Dozens of states have for years levied a 911 surcharge, which is supposed to help track the location of wireless customers placing emergency calls -- but, in New York, it was found that state police had used the money for dry cleaning, lawn mowing and travel expenses.

The fact that consumer telecom bills are almost entirely free of government regulation only exacerbates the problem, industry observers say. Customers can file a complaint with the Federal Communications Commission, but otherwise the agency has no control over what charges appear on a bill.

Even when described as temporary, many surcharges are virtually impossible to eliminate. The 3 percent federal excise tax that appears on phone bills was first imposed in 1898 to raise funds to fight the Spanish-American War. There have been numerous efforts over the years to eliminate it. But it's still on phone bills more than a century later.

Source: Yochi J. Dreazen, "New Taxes, Fees Hit Phone Bills," Wall Street Journal, September 18, 2002.


Browse more articles on Government Issues