Illinois’ Cell Phone Tax Highest in Nation

Illinois’ Cell Phone Tax Highest in Nation

ILLINOIS (IRN) — Illinois edged out Washington state to charge the highest cellphone taxes in the country this year, with wireless taxes accounting for 21 percent of the state’s average consumer bill, according to a report from the nonpartisan Tax Foundation.

Tax Foundation spokesman John Buhl said Illinois’ tax rates on cell service is similar to the sin taxes slapped on alcohol and tobacco. When including the federal tax on cell service, the combined total is about 27.5 percent of the average consumer bill.

“Taxes should be broad-based and low rates,” Buhl said. “[Taxes] should apply to everything equally and at as low a rate as possible, so this is kind of the opposite of that. The question is why should phones be taxed at such a higher rate than anything else we buy?”

He said such taxes on what’s become an essential part of life has a disproportionate effect on poor people.

“About two-thirds of lower-income adults rely on mobile phones in particular for their phone services, so it’s really the main way that they communicate,” Buhl said.

While tax revenue from landlines continues to decline, Buhl said the high tax rates put on cellphone service is pushed higher because each layer of government in Illinois is getting a piece.

“They can be county taxes, they can be local taxes for a variety of reason,” Buhl said.

He also said that while 911 fees added to cellphone bills serve an important purpose, sometimes those fees are diverted to fund other operations.

The city of Chicago is the worst offender, Buhl said. In Chicago, the effective tax rate is 41 percent. He said Illinois’ local governments should be mindful of the effects of high taxes.

“Lawmakers should kind of take a step back the next time they’re thinking of adding another few percentage point fee here, another tax there, on wireless services they should really think about what the big picture looks like and instead find fairer ways to raise revenue,” Buhl said.

Illinois’ average cell tax is the highest in the country at 27.6 percent, a full 1.5 percent higher than second-place Alaska and Washington.

Tax Foundation’s report also noted the national trends in tax rates imposed by all levels of government on taxable wireless service increased 0.6 percent across the country over last year.

“Between 2005 and 2006, wireless taxes dropped after the federal courts forced the IRS to end the imposition of the 3 percent federal excise tax on wireless service,” the report said. “After that court decision, wireless tax rates dropped to a low of 14.1 percent. Since then, however, wireless tax rates have climbed steadily to their current rate of 19.1 percent.”