Cable TV and Phone Calls are Taxed at Twice the Rate of Other Goods, Study Finds

CHICAGO and BOSTON, May 1 /PRNewswire-USNewswire/ -- A new study produced by a team of researchers from The Heartland Institute and Beacon Hill Institute finds taxes and fees imposed on cable TV and telephone subscribers are twice as high as the average sales tax on other products.

The average household pays approximately $250 a year in taxes and fees on cable TV and telephone services, and would save $126 a year if taxes and fees on communication services were no higher than retail sales taxes on other goods.

"Consumers pay more than $37 billion a year in communication taxes and fees," said coauthor David Tuerck, executive director of the Beacon Hill Institute and professor and chairman of the Department of Economics at Suffolk University in Boston, Massachusetts.

"Many of these taxes and fees are hidden in phone and cable bills. Because they are so high, they distort consumer decisions and business investment decisions, costing billions more every year in lost consumer benefits," Tuerck said.

The research team collected information on cable television, wireline and wireless telephone, and Internet access for 59 U.S. cities.

  The study found:

  -- Cable TV and phone service (wireline and wireless) customers pay taxes
     and fees averaging 13.52 percent, twice as high as the national average
     sales tax on other goods.

  -- Taxes and fees on communication services nationally add up to $37
     billion a year.

  -- Communication taxes and fees are highly regressive. Families in the
     lowest quintile of earnings pay 10 times as much as families in the
     highest quintile, as a percentage of their income.

  -- Taxes and fees vary dramatically from city to city, with consumers in
     some cities paying more than three times as much as consumers in other
     cities.

  -- In some cities, taxes and fees on wireline telephone service are higher
     than taxes on beer, liquor, and tobacco.

  -- Economists estimate the value of services lost due to high taxes and
     fees on communication services add up to a "deadweight loss" to society
     of $11.4 billion a year.

The authors recommend that local governments reform cable franchise laws. They further recommend that state officials and the national government consider policies to preempt local franchising authority and to prohibit discriminatory taxation of communication services.

Talking points, an executive summary, and the full text of the study are available on The Heartland Institute's Web site at http://www.heartland.org/.