While increasing, Iowa wireless tax still lower than most states

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(The Center Square) – Iowans pay less in wireless taxes than most of the country, but the state rate went up slightly this year, according to a report.

Taxes, fees, and government surcharges make up 20.81% of Iowans’ wireless bills this year, down from 22.12% in 2022.

However, the decrease is due to the Federal Universal Service Fund (FUSF) rate falling from 12.24% last year to 10.83% this year, a Tax Foundation report found. Meanwhile, Iowa raised its wireless tax rate from 9.88% to 9.98%.

It’s a nationwide trend as the decrease in the federal wireless rate was offset by increased state and local wireless tax rates, according to the report.

The FUSF decrease was the first one observed since 2017 and was more significant than the last time when the rate fell from 6.64% to 6.34%, the report said.

Iowa ranked 35th overall for its wireless taxes, unchanged from its placement last year. The state with the highest combined state-local and federal wireless taxes was Illinois at 33.79%, followed by Arkansas, Washington, New York and Nebraska. On the low end were Oregon, Montana, Delaware, Nevada, and Idaho at the lowest combined rate of 13.72%, according to the report.

Wireless users will pay an estimated $12.6 billion in taxes, fees, and government surcharges this year, the report found. That’s up from $11.2 billion last year. Of that, $5.3 billion represents state and local sales and use taxes and $7.3 billion are taxes that exclusively apply to wireless or other telecommunication services, the report said.

Approximately $3.8 billion in wireless taxes will be paid in the form of 911 and 988 fees, though “hundreds of millions” of that may not necessarily be used for 911 purposes in some states, the report found.

Although the federal wireless rate decreased for the first time in six years, it has doubled in the last twenty years. In 2003, the FUSF rate was 5.07%, compared to this year’s rate of 10.83%.

It means that even though average charges from wireless providers have decreased by 26%, customers don’t see a significant benefit as wireless taxes have risen, on average, more than 17%, according to the report.

It comes as over 70% of all U.S. adults live in wireless-only households, and that number is higher for low-income adults. A full 78% of low-income adults live in wireless-only households, the report said.

The average American household will pay around $294 per year in wireless taxes, down slightly from $305 last year, according to the report.

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