What is a ‘Regressive‘ Tax?
Not many people like to pay taxes, but some of them are truly unfair. A regressive tax is an example of that. If low-income and high-income individuals use a service or goods that is taxed at the same flat amount, low-income individuals are paying a higher share of their income in taxes than the others. That’s a regressive tax.
How It Works
In wireless tax terms, it’s simple — regressive means that a monthly tax and fee rate is imposed on everyone the exact same, but it has a much greater impact on some consumers. This is especially the case today with wireless taxes and fees. Today’s American wireless consumers are paying more than 16% (on average) of their monthly bill in taxes and fees, and for those who might be financially-challenged, such as those making lower incomes or living on fixed income, the impact of higher taxes and fees is certainly greater. That’s the very essence of a regressive tax.
Who Is It Hurting Most and Why?
- Discriminatory, new state and local taxes and fees on wireless services are typically regressive and can significantly increase consumers’ cost of service. That puts a real burden on fixed-income users such as: seniors, students, working families, small businesses and underserved or minority communities. This is particularly troublesome since studies indicate that often those on fixed budgets use wireless the most.
- In minority and underserved urban and rural areas of the country, wireless has become the device of choice for phone use and Internet capability. According to Nielsen, African Americans and Hispanic Americans talk and text on cellphones as much if not more than any other race or ethnicity in the country — on average using 100% more (or double) voice minutes and 28% more voice minutes than White users do, respectively, each month; and sending and receiving about 38% more SMS (text) messages and 36% more SMS messages than White users do, respectively, each month.
- The Pew Research Center’s Internet & American Life Project (September, 2013) shows that among racial or ethnic groups, African Americans and Hispanic Americans also use wireless to a very high degree – to access the Internet, send or receive email, play games, access social networking sites, post photos or videos online, and to bank online. African Americans and Hispanic Americans are also among the most likely to use cellphones to download an app, play music and participate in video calls and chats with a wireless device.
- If left further unchecked, this hefty and regressive tax bite can put wireless services out of reach for far too many who have come to rely upon its value, convenience and safety as the preferred communications tool for their daily lives.
- Consider a small business providing phones for 10 employees to do their work on-the-go, or a family with 4 children and 2 grandparents for which the heads of household are providing 8 cellphones per month to stay in touch. Unfair and excessive taxes and fees will ding them again and again, for every single device, and that really adds up fast.
What You Can Do
- Urge the U.S. Congress to pass the ‘Wireless Tax Fairness Act to pass the ‘Wireless Tax Fairness Act.’ It will put a stop to any new, discriminatory state and local wireless taxes and fees, for a period of five years. Let’s help keep wireless affordable and accessible for ALL Americans.
- Urge your state to undergo comprehensive tax reform, much in the way that Virginia looked at goods and services across the board, modernized its tax code on consumers, and actually wound up increasing its annual revenue.