October 11, 2016
Tired of seeing your cell phone bill increase every year? You might be surprised that it's not your wireless provider's fault. It's the government's fault, a recent study found.
The Tax Foundation released Tuesday its annual report on wireless taxes and found that Pennsylvanians pay one of the highest rates in the U.S.
The study found that the average monthly service bill for wireless customers has steadily decreased 11 percent since 2008 thanks to competition within the industry. However, taxes rates are growing at 23 percent so customers cannot realize the savings.
This year, taxes account for record-high 18.6 percent of wireless customers' monthly bill. Last year, customers paid an estimated $17.2 billion in taxes, fees, and government surcharges. All customers pay a federal rate of 6.64 percent, but taxes and fees vary widely across the nation.
For example, Pennsylvania residents face a 15.70-percent rate, the fifth-highest set of taxes and fees in the country. Only residents in Washington (18.78), Nebraska (18.67), New York (18.04) and Illinois (17.84) pay higher rates.
One reason for the ranking is the recent hike in 911 fees. Pennsylvania was one of five states to increase the tax for the emergency service. In August 2015, state officials raised the monthly fee from $1 per line to $1.65 per line, the largest hike in the nation.
Although Pennsylvania's wireless tax burden is one of the highest in the country, some state residents have it worse than others.
Wireless customers in Philadelphia are also impacted by one of the highest set of taxes and fees among U.S. cities.
In fact, Philadelphia is one of six cities to have a wireless tax rate that exceeds 25 percent. Philly's 26.24-percent rate ranks fourth behind Chicago (36.24), Baltimore (29.84) and New York (27.11).
Researchers from the Tax Foundation found that the high-tax rates are concerning. According to the Centers for Disease Control, about 64 percent of poor adults and nearly half of all adults use only wireless service. Since taxes are imposed on a per-line basis, low-income consumers are disproportionately affected.
For more information, see the Tax Foundation's study here.