For once, Louisiana is at the bottom of a national ranking for a good reason.
On average, Louisianans pay 1.54 percentage points less in taxes for cell phone service than they do in sales taxes, according to a recent joint study by the Tax Foundation and Scott Mackey of KSE Partners.
That places The Bayou State among just five states bucking a national trend in which most Americans are paying higher taxes on cell service than they are on general purchases, the study says.
According to the report, Louisianans pay on average a 8.79% state-local tax rate for wireless service, compared to the 10% average sales tax rate. The state is ranked No. 50 out of the 50 states plus Washington D.C. and Puerto Rico for the disparity between the state-local wireless tax rate and its sales tax rate. Louisiana is ahead of Idaho (a disparity of 3.74 percentage points) and Nevada (a disparity of 5.85 points) on the list. Alabama (0.08 points) and West Virginia (0.28 points) also deviated from the national trend, but had disparities that were much less than Louisiana’s.
Nebraska tops the list with state-local wireless taxes of 18.67%—11.54 percentage points higher than its state-local sales tax of 7.13%.
In general, Americans are not seeing the benefits of increased wireless industry competition which has led to significant reductions in average monthly bills, the reports says. It notes that since 2008, average monthly bills have dropped from just under $50 per month to $44.65 per month this year—an 11% reduction—while taxes and fees have increased from 15.1% to 18.6%, a 23% increase.
“Unfortunately, consumers are not enjoying the full benefit of these price reductions because of the growing tax burden on wireless service. Taxes are growing at a rate twice as fast as average wireless prices have been falling,” the study says.
That’s largely due to the Federal Universal Service Fund, which subsidizes telecommunication services for libraries, schools, hospitals, low-income people and rural telephone companies operating in high cost areas. The rate is set by the Federal Communication Commission each quarter, and the fund, in recent years, has been the largest driver of rising wireless taxes and fees in recent years.
This year, though, state and local taxes and fees have increased significantly, the study says.
When factoring in the Federal Universal Service Fund rate—which for each state is 6.64%—and Bayou State residents pay a combined 15.43% in federal, state and local wireless taxes, much lower than the national average of 18.6%, the study found.
Louisiana wireless users paid significantly less in combined federal, state, and local taxes than residents in Washington, Nebraska, New York, Illinois and Pennsylvania, all of which had combined wireless tax rates that far exceeded the national average.
The combined federal, state and local wireless tax rate for the top five aforementioned states range from 22.34% to 25.42%, the study says.
Louisiana’s state and local wireless tax rate of 8.79% is ranked the 38th lowest in the U.S., Washington, D.C. and Puerto Rico.
—Alexandria Burris
