Utahns pay some of the highest taxes in the nation for cellphone service — and that especially hurts low-income residents, according to a new national study.
Typical state, county and city taxes on cellphones in Utah now amount to a combined 14.7 percent of service charges, according to the nonpartisan Tax Foundation, a Washington, D.C.-based think tank.
(Christopher Cherrington | The Salt Lake Tribune)
That ranks No. 11 among the states, and is 28 percent higher than the national average of 11.44 percent.
Nationally, Illinois has the highest state and local taxes on cellphones at 20.91 percent, followed by Alaska (19.49 percent) and Washington (19.41 percent).
The lowest is in Oregon, at 2.1 percent, followed by Idaho (2.59 percent) and Nevada (3.27 percent).
When federal charges are added in, total cellphone taxes in Utah amount to an average of 21.34 percent of service charges.
The study says that causes problems for low-income people, 68 percent of whom on average nationally do not have landlines and rely only on mobile phones.
The rates “impose a disproportionate tax burden on those least able to afford them,” it says. “Excessive taxes and fees may reduce low-income consumer access to wireless service at a time when such access is critical to economic success.”
It also notes that Utah taxes on cellphone bills are more than twice as high as those on other products.
The study says typical combined state and local sales tax on other products in Utah is 6.85 percent. So similar taxes on mobile phones are 2.15 times higher — ranking as the 10th largest disparity nationally.
Such relatively high taxes also “may have ramifications for long-term state economic development and growth,” the study said.
“Higher taxes on wireless service, coupled with increased taxes on wireless investments, may lead to slower deployment of wireless network infrastructure, including fourth and fight generation [4G and 5G] wireless broadband technologies,” it says.
The study suggests that states should move “away from narrowly-based wireless taxes and toward broad-based tax sources that do not distort consumer purchasing decisions and do not slow investment in critical infrastructure.”
Of note, Gov. Gary Herbert is proposing a broadening of what is taxed through sales taxes. He has proposed expanding sales tax to some now-exempt services — to allow lowering overall tax rates. His budget plan suggested raising the sales tax on food — but the governor said he does not support such a move.
The study notes that cellphone taxes have been continually increasing across the nation in recent years — but the cost of cellphone service has been dropping because of competition among providers.
“Average revenue per subscriber [for phone companies] fell dramatically for the second year in a row, from $41.50 per month in 2017 to $38.66 per month in 2018,” the study said. “Unfortunately, consumers were not able to fully enjoy this price reduction because taxes, fees and surcharges continue to remain stubbornly high.”
