July 1, 2008

Nebraska's Cell Phone Taxes Among Highest in Nation

 

Alek Blankenau
Platte Institute

            Cell phones have become an integral part of everyday life throughout the country and world.  Every time we turn on the television, we are bombarded with advertisements from companies claiming they have the best service or price.  The handiness of cell phones has even driven some people to abandon the traditional land line in their houses in favor of an all wireless approach.  But with this communication revolution comes a price—taxation. 

Most Nebraskans may not realize that their home state is consistently ranked in the upper echelons of cell phone taxation nationwide.  In fact, Forbes Magazine and USA Today have listed Nebraska in the top five for having the highest cell phone taxes in recent years.  This year, a CTIA-The Wireless Association survey rated Nebraska as having the highest cell phone taxes in the country.  According to the survey, Nebraskans pay 22.54 percent, well above the national average of 15 percent, in cell phone taxes and fees. This is due to federal fees, state fees, state sales tax, fees for emergency communications, and in some cases, local sales taxes and occupation taxes.

To compare, Iowa’s tax is listed at 11.55 percent, which saves Iowans about $65 per year on a $50 per month cell phone bill.  But what is actually causing the Cornhusker State’s tax separation from the norm?  The answer boils down to two different charges, the fee for the Universal Service Fund and occupation taxes.  The Universal Service Fund is a program that ensures that customers in all regions have access to - and pay rates for - telecommunications services that are reasonably comparable to those in urban areas. It has a 4.37 percent monthly fee, which is the highest in the country for similar state funds.  Nebraska also uses occupation taxes, a special business tax, in order to raise revenue in individual cities.  Some cite that, since these taxes are only assessed in urban areas, the study is unfairly characterizing Nebraska as a high tax state, and point to the evidence that rural Nebraskans without occupation tax rank 31st nationally, not first. 

But with almost half of the state’s population already subject to these occupation taxes, with Lincoln and Omaha charging the highest rates, and more cities considering them, the time to stop is now.  Nationally, the ball is already rolling.  In the United States House of Representatives, Adrian Smith of Nebraska and Chris Cannon of Utah are working on legislation supporting a three year moratorium on wireless phone taxes.  In the same vein, Senator John McCain is working on a similar bill in the United States Senate. 

             When examining cell phone taxes, Nebraskans need to use common sense.  Would we allow a tax of over twenty percent in other aspects of our life?  For one reason or another, we have allowed the state to capitalize on an emerging product and market.  The total abolition of cell phone taxes is not what is needed or desired, but a tax rate at which Nebraska can be comparable to the rest of the nation is.