Governments at all levels have demonstrated a gluttonous appetite for revenue, and one of government’s favorite tactics is to attach high taxes to high demand products and services.
One example is so-called “sin taxes,” where government piles taxes onto things like alcohol, tobacco, and in some places marijuana, coffee, firearms and gambling. In other words, some group of bureaucrats has decided that those are bad things and that high taxes are justified on those items to discourage consumption.
The skeptic, of course, asks why it’s any of government’s business to punish or discourage consumption of perfectly legal items with taxes over and above the normal sales tax rate, but elected officials get away with it because voters let them.
The skeptic also wonders if somehow government isn’t taking advantage of the addictive qualities of alcohol, tobacco, marijuana and gambling in order to guarantee itself a revenue stream.
But skepticism really gets thrown into high gear when we realize that, in many locations, taxes on mobile phones are higher than taxes on supposedly harmful products. According to a new study from the Tax Foundation, the average US customer pays more than 18 percent in taxes and fees on their wireless bill, which is several times more than the average state sales tax rate.
And in many cities it’s much worse. In Chicago, consumers pay an incredible 36.24 percent in cell phone taxes and fees. In Baltimore it’s 29.84 percent; in New York it’s 27.11 percent; in Philadelphia it’s 26.24 percent; in Omaha it’s 26.06 percent; and in Seattle it’s 25.94 percent.
Wireless service is a clear societal good, not something that should be subject to “turbo sin taxes.” Wireless service allows us to reach emergency services when needed, stay in touch with our families, report (and record) criminal behavior, and conduct business more efficiently than ever. Not exactly behavior that should be discouraged by government.
Excess taxes on wireless service are also severely regressive on low-income Americans. Not that we would advocate making them progressive—we just think there is no justification for taxes on wireless service above the normal sales tax rate.
So why do politicians pass those taxes? Because they can.