The Cellphone 'Sin Tax'

In so many ways, Michigan’s got it good compared to Nebraska. We boast Michigan State University for one and the birthplace of punk, Motown and heavy metal for another. Hemingway hunted and fished here as a boy; it’s the birthplace of both George C. Scott and Dick York; and the Upper Peninsula inspired the poetry and fiction of Janet Lewis.

Compared to Michigan, Nebraska’s nothing more than a looong stretch of bupkis. And your writer should know as he’s driven across the state twice in the past two months. Therewith an ostensible reason for the state’s 75-mph speed limit — the faster you get through cornhusker land, the less likely you’ll wind up a character running from Johnny Law in a Bruce Springsteen song.

Michigan also squeaks out a victory when it comes to paying wireless taxes. When it comes to the percentage of wireless bills that pay state, local and federal taxes, Michigan ranks a somewhat respectable 38 behind No. 1 Nebraska. In fact, at 13.51 percent, Michigan beats the 17.18-percent national average. Nebraska is tops in the nation at 24.49 percent. 

According to “Wireless Taxes and Fees Continue Growth Trend” by Scott Mackey, Michigan residents pay not only the state sales tax for the luxury of communicating via wireless, but as well a 0.4 percent state wireless 911 and 0.89 percent county wireless 911 tax. Add a 0.39 percent intrastate toll-restructuring fund and the federal Universal Service Fund’s 5.82 percent tax and you wind up at 13.51 percent, more than double the 6 percent sales tax. It might be a death by a thousand cuts, but at least it’s not a bloodbath like Nebraska. It’s still a lot worse than the relative paper cut salved with a bit of salt and vinegar endured by folks in Oregon who pay a combined tax rate of 7.67 percent.

In an interview I conducted with Carl Gipson two years ago when he was still an economic policy analyst at the Washington Policy Center, he indicated that the wireless taxes in some states were approaching the level of “sin” taxes — the high rates consumers pay for stuff presumably deemed not good for them by bureaucrats such as alcohol and tobacco.

And, not unlike alcohol and cigarette taxes, customers often are unaware they’re paying hidden fees. And tax collectors enjoy that naiveté, as noted by The Tax Foundation:

States favor cell phone taxes because they can raise revenue in a relatively hidden way. Texas even sued Sprint because the company listed a state tax as a line-item on its bill rather than hiding it from customers. Utah uses what they call a wireless “fee” to fund its poison control centers, but the levy is really a tax because the government service benefits the general public regardless of cell phone ownership or usage.

MyWireless.org reports these taxes also are regressive, hitting “seniors, minority communities, working families and small businesses especially hard.”

Members of Congress have attempted to stem rising wireless taxes since 2011, when a bill was introduced to place a five-year moratorium on new local and state wireless taxes. That bill — H.R. 1002, the bipartisan Lofgren-Franks Wireless Tax Fairness Act of 2011 — passed the House unanimously but was allowed to die in the Senate in 2012. The co-authors of the 2011 bill, Reps. Zoe Lofgren, D-CA, and Trent Franks, R-AZ, reintroduced their measure as the “Wireless Tax Fairness Act of 2013” (H.R. 2309) this week.

If successful, the bill may grant a respite for those who have it even worse than Nebraskans, such as Baltimore city residents forced to pay 27.7 percent wireless taxes. That is if the increases are not only stalled, but eventually rolled back as well.

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