As the tax reform debate in Washington heats up, much of the public conversation has focused on ‘the wealthy’–whether high net worth individuals or our nation’s best performing companies. In contrast, two tax issues flying largely under the radar hit the pocketbooks of virtually every American–the amount of taxes on your monthly wireless bill and taxes paid for digital content like downloaded books, games, movies, and music.
Both levies go to the heart of the call for “fairness” in our tax system, since far too many consumers today pay more than what they should in taxes on mobile goods and services. With leadership in Washington, both can be converted into public-spirited victories perhaps in time for the holidays–putting an end to some of the most regressive and counterproductive tax schemes in our nation.
In the wake of Cyber Monday, we are reminded anew just how much the digital realm is central to modern commerce–and especially modern bargain hunting. Yet while consumers increasingly rely on mobile in our lives, wireless taxes are higher than average sales taxes in most states. Today, more than 30% of American adults live in mobile-only households, and they pay federal, state and local taxes and fees on their wireless bills that average over 17%. This is more than double the average state sales tax. These exorbitant taxes work directly against mobile’s strong track record of helping close the digital divide. Could mobile broadband be cheaper for us all? Yes, if mobile taxation weren’t so egregiously inflated.
It’s time to right this wrong and have wireless tax policies that are consistent with the broad goal of connecting all Americans to mobile broadband. Legislation before Congress, the Wireless Tax Fairness Act of 2011, would help limit this tax inequity that’s currently imposed on nearly 90% of U.S. consumers. This legislation would impose a five-year moratorium on all new discriminatory taxes on consumers’ mobile phone bills. The bill already has passed the House of Representatives and now awaits Senate action. It deserves prompt action. As more Americans depend on mobile broadband for connectivity, it is imperative that tax policies encourage, rather than discourage, mobile adoption and usage.
Have you ever downloaded a book on vacation? Purchased a digital movie or TV show at the airport? Buy your favorite song online from, well, anywhere? If you have then you have a stake in a second piece of tax legislation, too. The Digital Goods and Services Tax Fairness Act prohibits state and local jurisdictions from imposing multiple, or discriminatory, taxes on digital goods and services. Under the current system, when a consumer purchases digital content, they can be taxed over and over again by several jurisdictions. The Digital Goods Act’s national framework would prevent the possibility of multiple taxation by allowing only the consumer’s home state to impose taxes on a digital purchase–if the state chooses to do so.
This bill, too, should have priority in the current tax debate. With more than half of us owning a smartphone and a third of us adding a video-friendly tablet to our wireless repertoires, buying an app or other digital content should be safe from multiple and discriminatory taxation.
The digital economy is key to our nation’s growth and prosperity. While Congress wraps up it’s significant to-do list this year, it should put an end to unfair tax treatment of wireless consumers. The Wireless Tax Fairness Act and the Digital Goods and Services Tax Fairness Act would be a huge win for tax fairness for the nation’s mobile subscribers.