In a testimony before the Judiciary Subcommittee on Commercial and Administrative Law, Rob Atkinson discusses why discriminatory taxes on wireless services have a negative impact on economic growth and innovation. Dr. Atkinson explains, at minimum, any given tax should not: 1) significantly change consumer behavior, 2) be borne predominately by low-income consumers or households; and 3) inhibit economic growth—and a discriminatory tax on wireless services would violate all three principles.
Numerous studies have shown consumers use of wireless services are significantly impacted by price. Indeed, for every one dollar in tax on wireless services reduces consumption by of these services by $1.29. And because low income households are almost as likely to subscribe to wireless services as higher income households, a tax on wireless services would constitute a regressive tax. Finally, because wireless services create what is called a “network effect”—where the benefits wireless are an increasing function of the number of users—efforts such as a discriminatory tax that reduce the number of users necessarily reduce the value of wireless services for all those involved.