Wireless Taxes and Fees: A Tragedy of the Anticommons

25 Pages Posted: 18 Oct 2014  

Matthew D. Mitchell

George Mason University - Mercatus Center

Thomas Stratmann

George Mason University - Buchanan Center Political Economy; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: January 23, 2012

Abstract

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

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

Matthew D. Mitchell (Contact Author)

George Mason University - Mercatus Center ( email )

3434 Washington Blvd., 4th Floor
Arlington, VA 22201
United States

HOME PAGE: http://meractus.org

Thomas Stratmann

George Mason University - Buchanan Center Political Economy ( email )

4400 University Drive
Fairfax, VA 22030
United States
703-993-2330 (Phone)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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