Illinois’ Cell Phone Tax Among Highest in Nation

This article was originally featured on NBC Chicago on October, 13, 2014. 

Illinois has one of the highest cell phone taxes in the country, according to a new report from the Tax Foundation.

Americans pay an average of 17.05 percent in combined federal, state and local tax and fees on wireless service. This is typically made up of a 5.82 percent federal rate and an average 11.23 state-local tax rate.

According to the study, Illinois residents face a state-local tax rate of 15.81 percent, the fifth highest in the nation. In addition, Chicago has a tax rate in excess of 25 percent of the customer bill, making it one of four cities in the nation to have such a rate.

Among the states with the highest combined tax rates are Washington, with 24.42 percent, Nebraska, with 24.31 percent, New York, with 23.56 percent, and Florida, with 22.38 percent. Illinois follows Florida with a combined rate of 21.63 percent.

Meanwhile, neighboring states around Illinois aren’t even close to 15 percent.

In fact, the Illinois Policy Institute says Illinois residents would save more than $100 a year just by moving to Wisconsin.

Tax Foundation economist Scott Drenkard says it’s difficult to determine where exactly the money is going, but he notes that the costs are far greater than other area taxes like sales tax.

“Each individual part can be relatively small but there’s so many jurisdictions levying taxes on this service that the overall burden is very high, twice your average sales tax rate,” he said.

Drenkard also said Chicago bills can be exceptionally high.

“In Chicago, for example, their per line fee is so substantial that can be an additional 35 percent that Chicago residents are paying in taxes on their cell phone bills,” he said.

Other cities with higher-than-normal rates are Baltimore, Maryland; Omaha, Nebraska; New York, New York; and Seattle, Washington.

The states with the lowest rates were Oregon, Nevada, Idaho, Montana and West Virginia.

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TAGS: taxes