Written by: Dan Smith
Bloated New York government needs money. They use our mobile phone bills as a quiet way to support their own waste and corruption, while they hit us with the third-highest taxes in the U.S.—50% higher than average. We get little in return.
In New York, sales tax on most purchases of is 8.875%. But for some reason, tax on mobile phone service is almost 3 times that—almost 25%. Why?
I can find no good answer to that question.
High tax rates are usually reserved for “sins:” cigarettes, big boats, alcohol, etc.
Whether or not you agree with the premise that “sins” should be heavily taxed, do mobile phones belong in this group?
These days owning a mobile phone is a necessity for running one’s life. In many states, necessities are tax exempt to avoid the regressive punishment against the poor—but not mobile phone service. Phones are hit many times harder than other products. Quietly, enormous telecom taxes have been levied on all of us, disproportionally hitting those most dependent on the technology.
It appears they do it because they can, and because they need money—lots of our money.
“Wireless taxes have long been a fairly frictionless way for states and cities to get revenue,” says Jot Carpenter, Vice President of government affairs at telecom industry association CTIA. He means politically “frictionless”—you and I won’t complain or hold politicians accountable at the ballot box for taking so much of our money for no apparent reason.
It’s as Willie Sutton explained about why he robbed banks: “That’s where the money is.”
When you think like a bureaucrat, it makes perfect sense. And they don’t care who it hurts.
As With Most Tax Issues, New York is Among the Worst
New Yorkers have been hit HARD. The federal tax rate on mobile phone service is 6.3% (that applies to all states). State and local governments then layer on more—much more, an average of 12.2% more. Out of 50 states, New York adds the nation’s third-highest state and local taxes: 18.3%, which is 50% more than the average state. That brings the total cell phone tax rate in New York to 24.6%.
And while telecom companies themselves have competed in a cutthroat industry to reduce their monthly service charges by 17% over the past 10 years, those savings have been more than lost, as cell service tax rates have increased by 22% over that period.
So, as we complain about our cell phone bills going up, many of us blaming the carriers, we need to see that it’s really the politicians doing it to us. Ironically, as carriers improve service and technology and lower costs to us, bloated “public servants” view that as a bad thing, because it takes money out of their hands. And they need our money—it’s already been spent. So, they have to increase the tax rate to make up for the savings that the phone carriers are trying to give us, effectively erasing any savings by putting more of our money in the hands of bloated government.
Infrastructure and Services Don’t Justify the High Tax Rate
You may ask whether New York State provides a lot of infrastructure to assist the public or the telecom industry, which might make the taxes seem more reasonable. But this is not really the case.
State and local politicians will tout things like 911 emergency services, 411 information services, “right-of-way” infrastructure, and franchise agreements for services. But don’t fall for their rhetoric: these are inexpensive services to provide as compared to the massive tax revenue they take from all of us. The FCC found that a sizable portion of 911, 411, and other infrastructure taxes were diverted to other, unrelated purposes, such as coping with localities’ pension crises. Many other taxes and fees don’t even pretend to be related to mobile service.
You must ask yourself: why does New York need so much more cell service tax than other states?
Government officials simply need the tax money to support their waste and corruption. And since New York is so much more wasteful and corrupt than other states, high cell service tax is just another example of where New Yorkers get hit harder.
Just One More Reason Businesses Won’t Invest in New York
In addition to hitting the poor the hardest, higher tax rates discourage investment. Ask yourself: if you were considering bringing your business to New York, with it’s incredibly high income and property taxes, how might incredibly high telecom taxes impact your choice?
The International Chamber of Commerce concluded that such discriminatory taxes not only make doing business more expensive, they also create complexities which make it harder for new telecom companies to offer services, which limits consumer choices. New York is among the worst in all of these areas.
Put Them on a Diet to Make Us All Healthier
To be competitive and attract business and new jobs, New York doesn’t need to dump cash and goodies on companies and college students. Governor Cuomo has tried and it doesn’t work—only wastes. We need our government to get out of the way—stop with the oppressive taxes, stop with undue complexities, stop the need for permission to start a business or get a good job. Just stop!
In the case of telecom taxes, we need to immediately stop their growth. We should be telling Andrew Cuomo and the rest of Albany to roll back such taxes and put a cap on local taxes. We should permit just enough tax to cover essential 911 services and infrastructure, but no more. We can check ourselves against other states to see how we’re doing. We can scale back the limit over a number of years to manage the hit to local governments who have, sadly, become dependent on such tax revenues.
We must put New York government on a financial diet, starting with our cell phone taxes.