Woroch reflects on taxation in wireless

Posted by on December 21st, 2012, 4:51 pm

On Friday December 14th, the Center convened a forum entitled, “The Wireless Tax Premium: Economic Consequences for American Consumers and for the Future of the Mobile Economy,” as part of our Georgetown on the Hill series.  These events are meant to prompt discussion between Hill staffers, academics and industry in order to promote greater understanding around public policy issues. The discussion at this forum centered on the additional monthly costs to American consumers found in his or her monthly cell phone bill.  It is estimated that total consumer harm now exceeds $18 billion per year and continues to grow.

Professor Glenn Woroch, of the University of California, Berkeley and Senior Policy Scholar at the Center, presented his research in taxation on wireless usage, specifically the economic costs of the “wireless tax premium” on cell phone users.  Woroch framed the conversation by looking at President Obama’s 2011 State of the Union speech wherein the President called for 98 percent broadband connectivity by 2016. The presentation (available here) went on to discuss the history of taxation on wireless users.  To a put these costs into context, Woroch made comparisons between wireless taxes and those levied on cigarettes, beer and gasoline.

Woroch posed some options on how consumers could deal with these taxes: reduce wireless consumption, switch to pre-paid service or use non-cellular services. He asserted that mobile phone usage is a data gateway and that taxation of voice hinders mobile data. The presentation concluded with some policy suggestions: 1) “hold the line” on wireless tax premiums and 2) unify the tax system at state level in order to stop the growth of these taxes. To ensure the benefits of wireless technologies for consumers and the U.S. economy, tax authorities should show restraint by reining in wireless taxation.

John Horrigan, Vice President and Director at the Joint Center for Political and Economic Studies, served as a thoughtful discussant.  Dr. Horrigan highlighted the importance of mobile access to the low income population, and gave the statistic that roughly seven percent of Americans have only a smartphone for internet access.  Relationship between smartphone engagement and overall access to the Internet. He discussed the impact that taxation has on Jobs growth, from taxation of digital goods and apps downloads.  He concluded his remarks by drawing the audience’s attention to a recent piece,Kludgeocracy: The American Way of Policy,” By Steven M. Teles, Johns Hopkins University writing for New America Foundation,  which discusses how the tax policy environment has become extremely complex.

To view Professor Woroch’s presentation click here.

To read Professor Woroch’s Economic Policy Vignette on the wireless tax premium click here.




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