What’s Working: Wireless phone bills in Colorado are lower than the national average
This article originally appeared on The Colorado Sun
It may be surprising to hear that a typical Denver cellphone bill is slightly less than the U.S. average, even though the metro area’s cost of living certainly is not.
At $118 each month, Denver’s monthly phone bill is $1 less than the national average, according to DoxoInsights, the research arm of online-bill payment service Doxo. The company calculated the 10 most common household bills to determine the amount by region (as well as for 48 towns and cities in Colorado). Add all those monthly bills up, though, and metro Denver was much more expensive, with average household spending on bills at 23.8% higher than the U.S. Blame our housing costs, auto payments and insurance for helping push Denver’s inflation rate higher than the nation’s all year.
But don’t blame your wireless phone company.
“Verizon does not charge differently based on location,” said Liz Gelardi, Verizon’s local spokesperson, “but local and state taxes do vary.” The company also has plans where taxes and fees are rolled into one cost.
Similar comments were shared by AT&T and T-Mobile.
Monthly wireless revenue has been shrinking for years, according to CTIA, the wireless industry trade group. In a survey of carriers, CTIA data found that the per unit revenue averaged $34.56 per month, down 26% from $47 a decade ago.
“Market competition has brought the price per line down 26% in 10 years. That’s wonderful,” said Adam Hoffer, director of excise tax policy for the Tax Foundation, a nonpartisan think tank that analyzes tax policies. “But at the same time, we’ve seen a 7 percentage point increase in taxes. So, bills have come down, but taxes have eaten away a large percentage of that gain.”
Nearly 25% of the monthly bill is taxes, fees
Hoffer co-authored the 2023 “Excise Taxes and Fees on Wireless Service” report and found that wireless taxes and fees have been steadily rising over the years and now make up 24.5% of the average bill. It was 17.1% in 2014.
That’s due to a mix of things. Federal taxes and fees jumped 36% in 2019, largely due to consumers ditching their landline phone service. Fewer customers has meant fewer contributors to the Federal Universal Service Fund, which has long taxed voice calls (and not wireless internet data) to subsidize service in rural areas and for low-income households. The federal rate has gone up another 20% since then, and currently is 10.83% of the monthly bill. That’s down for the first time in six years and Hoffer said it may be due to more lines or lower expenses for the fund. But that’s a fee all American wireless customers pay.
It’s the local fees that make monthly bills vary by location. Overall, the average state fee increased to a rate of 13.7% this year, according to the report. And if you are paying for multiple phone lines, those fees add up.
The impact of local and state fees
Some is due to an increase in each state’s contribution to its Universal Service Fund. This year, Texans experienced the largest annual rate increase, to 17.42% from 11.89%. The highest overall local rates were in Illinois, at 22.96%. The lowest was Idaho, at 2.89%.
Colorado’s rate was near the middle, at 13.42%. Hoffer wasn’t aware of any additional local taxes in the state. But local governments in 14 states do add more fees, including Chicago, which charges $5 extra per line to pay for modernizing its 911 system. Baltimore is at $4 a line.
Additional state costs include fees to support 911 and 988, a newer number dedicated to suicide prevention nationwide. Fees don’t change frequently, but proposals do pop up annually, Hoffer said. In January, Colorado raised its monthly 988 fee to 27 cents from 18 cents per line.
“The biggest flag on applying wireless taxes is that it’s a very straightforward, regressive tax,” Hoffer said. “Higher-income households don’t spend a larger percentage of their budget on wireless bills than lower-income households. … Roughly 70% of low-income households live in wireless-only households so these taxes can hit them relatively harder than other groups.”
Taxes don’t usually go away. But Hoffer said he’s advising a group in New Hampshire looking into getting rid of the state’s tax on phone calls. Getting rid of the tax doesn’t mean the state is getting rid of the services the fees help fund, such as the emergency 911 calls.
“The go-to answer is just broad sales taxes (because) these better capture every single person in the state that is paying the tax rather than only those who have a cellphone. Of course, New Hampshire has the challenge of (no) sales tax. Then you have to look elsewhere, maybe property taxes or income taxes,” he said. “I think most people just pay the tax and aren’t scrutinizing their wireless bills every month to see how much they pay in taxes. They just hand over the money and to some extent, that’s what the policymakers like.”
➔ $294 — How much a household on a typical family plan with four phones will pay in taxes, fees and other surcharges in 2023, according to the Tax Foundation. Last year, it was slightly higher at $305. In 2016, it was $225.
My multi-state family plan
For fun, I looked at my own monthly wireless bill pretty closely. I happen to have a large family plan to support retired relatives. Phone lines are spread out in California, Texas and Colorado.
The highest? Texas.