The state has the highest wireless service taxes for the second year in a row, according to a new report.
As cell phones replace the need for landline telephones, the cost of wireless service is declining. Yet Washington’s phone bills aren’t reflecting the trend.
Despite greater competition in the communications marketplace, federal, state and local taxes and fees are deepening the tax burden to record-high levels for consumers, according to a report from the Tax Foundation, a tax policy and research group.
“Increases in federal, state and local fees drove the national average wireless tax and fee burden to its highest level ever—nearly 18 percent of the average U.S. wireless customer’s bill,” the report said.
And Washington wireless service customers are the worst off. In the report, which ranks all 50 states, plus Washington D.C. and Puerto Rico, Washington state tops the list with a combined tax bill of 25.15 percent—so high that it almost matches the total of three surrounding states combined.
Right across its southern border, Oregon has the lowest tax in the nation at 8.26 percent. Its eastern neighbors Montana and Idaho have wireless taxes totaling 12.57 percent and 8.63 percent, respectively.
What gives?
Washington’s state-local surcharges, including Tacoma and Seattle’s local sales tax and utility franchise tax, total 18.69 percent.
Washington’s state-local surcharges:
- State sales tax: 6.5%
- Local sales tax: 2.65%
- Utility franchise tax: 7.50%
- 911 state: .54%
- 911 local: 1.5%
The disparity of the wireless tax lies with state-local taxes and fees. For comparison, Oregon’s state-local portion of the wireless tax is 1.80 percent. Unlike Washington, it does not have any sales tax nor two separate 911 fees. It’s state-local tax structure is composed of a 1.61 percent 911 tax and a 0.19 percent Residential Service Protection Fund (RSPF) fee.
Washington’s local 18.69 percent tax combined with the federal Universal Service Fund (USF) surcharge of 6.46 percent, brings the total to more than 25 percent, the highest wireless tax in the nation.
Other states with the highest wireless tax rates are Nebraska (24.99 percent), New York (24.36 percent), Illinois (23.92 percent) and Missouri (21.25 percent).
Americans are increasingly relying solely on wireless communication services, according to the CTIA Wireless Association. And more Americans living in poverty (56 percent) live in wireless-only households than those in a higher-income bracket (36.6 percent).
For many business owners and entrepreneurs who rely on communications and information technology, these excessive wireless taxes for short-term local revenue gain can negatively affect the long-term economic gain, the Tax Foundation report notes.
“Higher taxes on wireless service, coupled with increased taxes on wireless investments, may lead to slower deployment of wireless network infrastructure, including fourth generation ‘4G’ wireless broadband technologies that an increasingly mobile workforce relies upon for economic success.”
Aside from having the highest wireless taxes in the nation, Washington small businesses already have a full plate of challenges facing them in the coming year: A legislative debate to raise the statewide minimum wage, which would adversely affect small business owners, is poised to get started in January. Also looming: a potential mandate to provide paid sick leave for employees and a push to impose a decade’s worth of rate surcharges onto small businesses to build up workers’ compensation reserves that were squandered by previous administrations.
NFIB/Washington is organizing its Small Business Day at the Capitol event on January 27 to bring together small businesses and supporters to network and amplify the concerns of the small business community as the next legislative session gets underway.
