Why Are Mobile Phones Taxed So Massively In The US?

Why Are Mobile Phones Taxed So Massively In The US?

When tax expert Bob McIntyre’s daughter bought a mobile phone for $US25, he was surprised to learn she ended up paying almost $US60 in total, once taxes were added in. What followed was his adventures into the messy world of the US government’s mobile phone taxing scheme, which is calculated based on the original sticker-price of a phone, and not the post-rebate and discount price.

But why are phones taxed so highly, when cigarettes are taxed in the US at around 22 per cent? Mobile phones aren’t nearly as damaging to lives – nor evil! – as tobacco and the companies who make it. Tax differs from state to state, but according to Slate, New York, Nebraska and Washington have the highest taxes on phones, at around 22-23 per cent (that’s federal, state and local tax combined.)

Nebraska is actually the worst, where the tax is collected by the local city and put towards public services. Omaha, for example, is expected to collect $US16.5 million this year, from local mobile phone taxes alone.

At federal level, we can blame the FCC for a start, which has raised the USF surcharge in recent years. This Federal Universal Service Fund subsidises low-income earners and rural-dwellers’ phone services, along with supplying schools and libraries with internet and phone services. There’s no denying it’s a tax worth paying – but if only it were the carriers paying it, and not passing it only their already-crippled customers.

When everyone (and their dog) owns at least one mobile phone, it’s hardly seen as a decadent purchase – or even avoidable. Yet the government hasn’t lowered mobile phone tax since day one, despite it no longer being the extravagant purchase it once was (in Wall Street movie-era, naturally). Court cases taking on carriers over these steep hidden charges are becoming more prolific, so over time we might see them lowered. But I wouldn’t hold your breath. [Slate]

Original Image Credit: Pyxopotamus