Illinoisans pay nation’s highest wireless cell phone service tax

Illinois wireless plan holders paid more on average in federal, state and local taxes than anywhere else in the U.S. The taxes were higher than the combined taxes of the two lowest-ranked states. Chicagoans managed to pay even more.

Illinoisans paid the highest state and local taxes for wireless cell phone service in the nation in 2023, spending more monthly than the combined rates of the two lowest states – Idaho and Nevada.

Illinois wireless plan holders paid 23% in state and local taxes, fees and government surcharges on their monthly wireless bills last year. Residents in each state also paid 10.8% in federal taxes to the Universal Service Fund for cell phone service in 2023.

That gave Illinois a grand total of 33.8% in government taxes on the cell bills compared to the 24.5% U.S. average. It also added $34 to the average $100 monthly bill for a family of four’s shared plan.

That means Illinois families pay $406 a year in cell taxes compared to the U.S. average of $294.

Chicagoans paid even more for cell phone service – the highest per-line tax among cities studied. Illinois allows local taxes of $5 per-line on Chicago service plan holders in addition to the percent-based rate.

On average, a family of four in Chicago paying $100 per month for wireless services last year spent about $409 on state and local taxes, according to the Tax Foundation. With federal taxes, their total was $539.

Cell phone taxes are considered regressive, meaning they impact low-income users more because they take a larger share of their incomes. Illinois and Chicago have long relied on regressive fines and fees, such as the per-line service tax, to balance government budgets amid crowd-out from the state’s nation-leading pension crisis.

Illinois’ excessive taxes and fees are increasing the cost of wireless services at a time when citizens are relying on them more than ever. Wireless services are fast becoming the sole means of communication for many Americans, particularly those in poverty. More than 76% of all low-income adults had wireless-only service.

State lawmakers and city leaders should move away from regressive per-line wireless service taxes that disproportionately hurt low-income residents. They could do so by making cost-saving moves such as constitutional pension reform to control the rampant growth of public pension debt.