(The Center Square) – Alaskans are currently saddled with a 26.5% tax rate for their cell phones, higher than most of the country, according to a new report released Tuesday.
Alaska ranked 16th among states with the highest cell phone taxes in the Tax Foundation’s 2022 report examining excise taxes and fees on wireless services. It found taxes and fees increased nationally for the fifth straight year.
The national average wireless and general sales and use tax rates reached 25.39% in 2022, up from 24.96% in 2021 and a dramatic increase from 2003 when the report said the average was 15.27%.
The state-local rate for wireless service in Alaska is 14.27%, the Tax Foundation said. Combined with the Federal Universal Service Fund rate of 12.24%, Alaskans are paying a 26.5% tax rate for their cell phone usage.
Illinois had the highest wireless taxes and fees at 34.89%. The lowest was Idaho at 15.04%, the report found.
In many states, local taxes and fees on wireless services revealed a disparity when compared to general sales tax rates. Alaska was among the worst in this respect. Its state-local sales tax is 2.50% compared to the state-local wireless tax of 14.27%.
Alaskans pay an estimated $3.46 in state-local taxes for a single-line wireless plan, the report found.
H.R. 3086, known as the Permanent Internet Tax Freedom Act, would amend the Internet Tax Freedom Act to permanently prevent states and local governments from also taxing internet access.
“Without the protection of the federal law, the high excise tax rates applied to taxable wireless services could be applied to internet access and consumer tax burdens would be significantly higher,” wrote the authors of the report.
Census Bureau data shows about 52% of a typical bill for a wireless line is taxable wireless service, while the rest is usually non-taxable internet access.
The report warned taxes on wireless services are regressive and burden low-income taxpayers more than high-income taxpayers. Furthermore, lowering wireless taxes and fees could increase investment in wireless infrastructure, leading to more successful businesses, the creation of more jobs, and healthier economies, offsetting any perceived short-term loss of tax revenue for governments, according to the report.
“Lawmakers should be cautious when increasing regressive tax burdens, particularly in the case of a targeted excise tax that does not meaningfully internalize any external harms and often far exceeds any amount necessary to pay for related government programs,” the authors wrote.
