25 Pages Posted: 18 Oct 2014
Date Written: January 23, 2012
Combined federal, state, and local taxes on wireless services are about twice as high as the average retail sales tax. While the normative justification for above-average taxation of wireless service is weak, there is a compelling public-choice explanation: The mobile service tax base appears to suffer from a tragedy of the anticommons. That is, multiple parties have the power to block or partially block access to a resource, resulting in underutilization of the resource. In our context, numerous overlapping tax authorities seek to obtain revenues through wireless-service taxation, and this may lead to overexploitation of the tax base. The anticommons problem has two dimensions. First, the mobile-service tax base funds numerous distinct projects at each level of government. Second, the base is taxed by numerous overlapping levels of government. We use state-level data from three years to examine the possible economic, demographic, and political factors that might explain the variation in these rates. We find that wireless tax rates increase with the number of overlapping tax bases.
Keywords: Public Choice, Tragedy of the Anticommons, Rent-Seeking, Tax, Mobile Service
JEL Classification: H2, D72
Suggested Citation: Suggested Citation
Mitchell, Matthew D. and Stratmann, Thomas, Wireless Taxes and Fees: A Tragedy of the Anticommons (January 23, 2012). Available at SSRN: https://ssrn.com/abstract=2510841 or http://dx.doi.org/10.2139/ssrn.2510841