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1 Joseph Henchman, States Target Cell Phones for a Stealth, Burdensome Tax 1 (2008)

handle is hein.taxfoundation/ffbbgxz0001 and id is 1 raw text is: FOUNDATION States Target Cell Phones for a Stealth, Burdensome Tax Fiscal Fact No. 116 by Joseph Henchman January 18, 2008 Cell Phones Are Multiplying, and So Are Cell Phone Taxes In the last decade, the number of U.S. cell phone subscribers has quadrupled, from 55 million in 1997 to over 250 million in 2007. That period has also seen a fall in landline telephones (the number of which dropped to 170 million), and 2007 marked the first year that Americans spent more on cell phones than on landlines. This trend toward cell phones has not gone unnoticed by state and local governments, which have targeted cell phones for higher taxes. These state and local levies averaged 9.04 percent in 2005, according to the Council on State Taxation, with 20 states charging a tax of 10 percent or more. Taking into account the infamous federal telephone excise tax (dating to the Spanish- American War and partly repealed in 2006), some cell phone subscribers pay more than 20 2 percent in cell phone taxes. States favor the taxes because they can raise revenue in a relatively hidden way; Texas has even sued Sprint because it listed a state tax as a line-item in its bill.3 As a result, cell phones are taxed at a much higher level than other consumer items, even as much as or more than alcohol or cigarettes. Scholars from across the political spectrum have criticized telecom taxes as burdensome, regressive, and stifling consumer choice.4 In response to this problem, Senators Jim DeMint, John McCain, John Sununu, and Gordon Smith introduced a bill in 2007 that would bar new cell phone taxes with rates higher than comparable products. The bill, the Cell Phone Tax Moratorium Act, had passed committee the previous year but died before reaching a floor vote.5 Because each state and many localities can impose cell phone taxes, and because they can be imposed as a percentage or as a flat rate, there are numerous taxes which vary widely. Researchers have found it difficult to create a database of cell phone taxes, and cell phone companies have encountered similar problems in calculating the taxes. This can be a serious

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