Last week, the House Judiciary Committee held a hearing on the issue of internet sales taxes.
It is a difficult issue in a way: One wants a fair system that doesn't unfairly punish traditional retail stores, while recognizing that internet sellers do not make the same use of the services that are paid for through the sales tax. As more and more Americans turn to shopping online, mostly for convenience and greater variety, but also for many to avoid sales tax, one feels sympathy for the brick-and-morter stores. That is, at least, until you consider what it would mean for online retailers to have to comply with the sales tax system for all of their customers nationwide: There are 9,600 tax jurisdictions, which means it impractical, if not functionally impossible, for online retailers to follow these rules.
Americans concerned about our unfair tax system, and the burden that our impossibly complicated tax codes create of retailers everywhere, should be champions of tax simplification at the city, state, and federal levels.
They also should be aware of how their government's pick and choose what to target for special taxes. We've all heard about special taxes on alcohol and cigarrettes. There is little evidence that such sin taxes work, but at least one understands the impulse of what policymakers are trying to do: If you want less of something, tax it.
That's why many people would likely be surprised to learn that wireless technologies are subject to some of the highest tax rates of any good or service. On average, wireless is taxed at a rate of 16.76 percent, which is nearly two-and-a-half times the average state sales tax.
The logic behind these special taxes may once have been that wireless services are a luxury, but today Americans at all income levels use wireless technology, and, in fact, a growing number of Americans depend exclusively on cell phones, while forgoing a land-line.
Wireless technologies are not just about accessing entertainment, but are often critical work and learning tools, as well as communications devised. In an industry survey, most wireless consumers reported seeing access to wireless technologies not only as critical to their everyday life (more than 80 percent consider it an essentially service), but as important for increasing their productivity at work (44 percent) and in school (17 percent).
It is this fact that wireless communications are considered so essential, that makes them an attractive taxation vehicle for governments. But far from progressive, these taxes on wireless technology particularly affect those with tight budgets and who can't afford to pay the extra dollars a month. In fact, when asked if an additional five dollars a month were added to their wireless bill, one-quarter of current wireless users reported that they would “definitely” reduce their wireless service and two-thirds would either “definitely” or “consider” reducing their plans. Those will lower income, African-Americans, Hispanics, and Americans under age 40 were most likely to report having to consider reducing their wireless access due to rising costs.
Rather than seeing wireless services as a vehicle for filling government coffers, policymakers across the country should help Americans of all income levels to be able to use wireless technologies, and access that vast network of information, by ending these regressive taxes.