Efficiency Effects on the U.S. Economy from Wireless Taxation [report]

Jerry Hausman
1999 unpublished
This paper measures for the first time the economic efficiency effects of the taxation of wireless services, which are taxed by federal, state, and local governments at relatively high rates in the range of 14%-25%. The paper concludes such taxes are a much greater drain on the economy than their direct costs. The taxes identified in this paper cost the economy $2.56 billion more than the $4.79 billion they raise in tax revenues. These taxes are raised from wireless consumers and thereby
more » ... s demand for service, imposing an efficiency loss on the economy of $0.53 for every $1 currently raised in taxes. Prospective taxes will impose an efficiency loss of $0.72-$1.14 per additional dollar of tax revenue raised. Summary Unlike local wireline access services, demand for wireless service is relatively elastic. This paper measures for the first time the economic efficiency effects of the taxation of wireless services, which are taxed by federal, state, and local governments at relatively high rates in the range of 14%-25%. The paper concludes such taxes are a much greater drain on the economy than their direct costs. The taxes identified in this paper cost the economy $2.56 billion more than the $4.79 billion they raise in tax revenues. These taxes are raised from wireless consumers and thereby suppress demand for service, imposing an efficiency loss on the economy of $0.53 for every $1 currently raised in taxes. Prospective taxes will impose an efficiency loss of $0.72-$1.14 per additional dollar of tax revenue raised.
doi:10.3386/w7281 fatcat:7daisoasf5hahavkylg7zgeccq