So, do you ever think to yourself after getting your first couple cell phone bills “boy, that sales rep sure is a lying pile of horse feces”? Sure you do, and usually with good reason. One thing he isn’t 100% responsible for is the fact that your bill is legitimately going to be somewhere around 15%-40% higher than it should be thanks to a million different areas of government getting their hands into your pocket through your cellphone bill.
This picture actually has nothing to do with taxes. It's just displaying RIM's entire current net worth.
Now, for the sake of keeping this brief enough for the ADHD masses that decide to read a blog over a book, I’m going to keep this to the fees people actually see on a bill, or most easily relate to paying drastic increases in money over.
I’m not going to go into great detail on how the FCC tightly regulates spectrum (think of spectrum as the limited radio frequencies wireless operates on) and auctions it off for proceeds, because it seems like you need an engineering degree to fully understand how dicked over you’re getting. $60 billion dollars they’ve made through auctioning that spectrum off to companies, and you know where that leads. Those companies that own that spectrum are going to bleed that money right back out of the consumer without the consumer realizing they’ve just been inadvertently taxed by the government while that government sells to the wealthiest companies, pretty much ensuring that only a few companies control the vast majority of spectrum.
Instead, let’s focus our attentions on the things we do see on the bill, so I can show you how it’s possible to be paying as high as a 42% tax rate on your bill. Looking on your bill you see about a million little bonus costs. They’re tricky, because they’re listed in multiple areas, but we’ll start with the ones that are listed as taxes, and make our way to the ones charged as fees.
When it comes to taxes, this is generally only going to include sales tax. Not so bad, right? Sales tax is usually pretty low, and some states don’t even have it! Well, laugh it up Oregan, Delaware, New Hampshire, and Montana, but if you think you’re getting off that easy, you are very wrong, because there’s plenty more in store for you. Anyway, state sales taxes usually range between 4%-9.45%, but that’s just regular sales taxes. Some states have a luxury (excise) tax, and some of THOSE states have decided that cell phones are part of that luxury tax, as the first thing I relate to cell phones are cigars, yachts, and monocles. I mean, when you’re not at home there are always all those pay phones on the sides of the streets nowadays, right?
Now, this is great, but counties, cities, and municipalities of all shapes and sizes also need to get their piece of the pie, so you might find your phone bill containing a whole load of extra little sales taxes tucked in there, too. There really isn’t any regulation on what local municipalities can tack on your bill, so if you get a tax happy bunch, be prepared to watch your bill shoot up.
Though entirely unrelated, this comes to mind.
Ok, so sales taxes can be a tough pill to swallow, and luxury taxes at double that level get tougher, but what are these fees on this bill, and can it really be that bad? Of course the answer is yes, or you probably would be pretty mad you read this far.
We start with both federal and state USF (Universal Service Fund) fees. The Federal USF charge is huge, and for the most part it takes your money in order to make sure cell phone service isn’t more expensive for people that live way the hell out in the middle of nowhere. Ever wonder why those crazy rednecks that live in the middle of a swamp get a cell phone tower devoted pretty much solely to themselves and a couple other neighbors? Yeah, you help pay for that.
Some of the rest of the Federal and the majority of the State USF charges go towards putting wireless in government buildings and libraries. Also, there is Lifeline, which is basically like phone welfare. Now I don’t want to say that getting a dollar amount off your cell bill when you’re low income is necessarily a bad thing, but I will tell you that the Lifeline discounts I normally see (usually around $13, sometimes more) come off cell phone plans that include multiple smartphone family lines with unlimited minutes and messaging.
Not to finish there, 45 states and many cities go an additional step and tack on a fee for emergency services. This 911 fee is a reasonable enough idea (and would be more reasonable if it didn’t feel like it should already be included in one of the billion other ridiculous taxes), but the problem is with the amount. With some states it’s about .40 cents, and most people can live with that, but when you get to certain areas it’s absolutely ridiculous. Chicago’s E-911 fee is $2.50! A flat $2.50! You’re going to tell me that you are using $2.50 from every cell phone in the entire city to run your emergency services? If you are, you need to make that stuff about ten times as efficient. If you’re just trying to gauge out more taxes, have the decency to name the additional taxes what they are. Try something like “Our Future Governors Legal and Prison Upkeep Fee”. Not to mention the state often charges an additional .24 for some goofy state utility tax.
Last, but certainly not least, there is the Regulatory Cost Recovery Fee, which is your cell phone carrier’s way of telling you that you’re going to be paying for all the stuff the government forces them to pay for. Federal mandates for storing pools of numbers to assign, the services they’re forced to carry to make sure you can port your numbers to and from other companies, E-911 setup, services for the hard of hearing and speech impaired, and the Regulatory Fee they pay to operate all get passed right on to you in the form of a fee that usually ranges between $1.25 and $1.80.
Now there are other little things other states have to toss a few cents onto your bills, but this seems like a good enough idea for the time being. To sum it up, let’s take a look at what fees a person in Chicago can expect to pay on a five line family plan.
OK, so we have a five line basic family plan for a person living in Chicago. Let’s estimate it at about 69.95 for the first two lines, and 10 for each line afterwards, putting the pretax bill at $99.95 (Verizon Pricing. Basic limited minute family plans with all major carriers are pretty much the same). Not bad for five phones, not bad at all. There might be a $30 activation fee if you can’t get them to waive it, and most companies have some workaround for that, like ordering online, or bugging them enough. Then start the problems.
Now, you get a subsidized price off your phone for starting a new line. Free phone that would normally retail for a hundred fifty bucks!? Nice. No tax on that, right? Wrong. The government has decided that since those were essentially being treated as freebees by companies to get you to sign big revenue generating long-term service contracts, they were not being taxed enough.
If you think about it, that really makes no sense. Right in that sentence they admit that it’s in return for the big service contracts which are very well sales taxed. Now you are not only getting the full tax on the phone that was subsidized, but you are also getting fully taxed on the service plan that is higher to make up for the cost of the phone subsidy. That is seriously stupid and basically ends up with you getting taxed twice. It boils down to paying taxes on a loan you take out to buy something you’ll be paying taxes on.
Whatever, so you got jobbed on some sales taxes on your phone. Now, a smartphone like the iPhone can frequently go from $700 down to $200, so if that was the case you’d be paying taxes on an extra $500. In Chicago, the city of super-taxes, that would be a pretty huge hit. Thankfully, in this scenario we’re only getting a $150 subsidy, so the sales tax is slightly less absurd.
$150 phone subsidy with a sales tax of 7% from the state. That’s $7. Now, the service plan is 100, and that gets taxed at the 7% excise tax from the state, 7% “communications” tax from the city, 3% from the fed. Nice, there’s $17 more. So after sales tax we have a one time $7 worth of tax on a $0 phone, and a regularly occurring $17. That’s a good start.
Now this is when we come to the USF charges. These are charged at the account level, and then more small ones for each line. We’re looking at about about $1.00 a line in all these goofy little charges, one of which might be a utility charge for who knows what depending what part of the city you’re at. Add that to the rest and your recurring fee just jumped to about $22.00. I would like to stress to you that I have estimated this DOWN to $1.00 a line, assuming you’re in a generous area
Fees are where things get most interesting, as these are charges PER LINE. We’re looking at regulatory cost recovery fees of about a $1.50 a line on average, and our Chicago special $2.50 insane E-911 fee. I hope you’re calling 911 a lot to get your money’s worth, and if these taxes hint at anything, it’s that you might just need to use that number after you see your bill so they can zap you with those little paddles after you have your heart attack. ($1.50 + 2.50) x 5, and we have another $20.
Nice, $42 worth of taxes every month on a $100 bill, now you’re talking. Sure, I’ll admit, Chicago is an extreme example at what ends up being 42% taxed, because the people that live there are apparently all criminals or dummies, but all major cities are nearly as bad when it comes to cell taxes, and all smaller cities are just regular horrible. Why is this something that doesn’t get more complaints? Is it ok because you only have a single line plan (which have a lower tax % rate because they end up being more expensive per line) and only pay 25% taxes? Do you have a more expensive plan, so the flat fees take a smaller % of the overall bill? Do you live in a different city and only pay 15-20% taxes? I don’t know about you, but that still strikes me as wrong.
I suppose if you’re a big believer in flat taxes cell phones taxes are pretty much where it’s at, since a family’s economic standing really doesn’t seem to have a huge impact on how much they spend on their wireless bills. Hell, people that are still too poor for the good stuff are on pace to pay a much higher percentage tax rate on their bill than people with money for their own single line smartphone plans!
Oh well, just add it to the list, I suppose. Don’t think that if you’re on a flat rate prepaid plan you’re getting off easy, either. Although they avoid a couple of the fees, companies include those taxes into your bill. I was going to put in a really great NSFW image of a guy bending over with unspeakable IRS related things being inserted inside him, but hey, I’m a classy guy. That’s the note I’ll leave this on, because really, that’s the most important thing for you to take away out of this.
My Crushed Soul 