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Efficiency Effects on the U.S. Economy from Wireless Taxation

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  • Jerry Hausman

Abstract

This paper measures for the first time the economic efficiency effects of the taxation of wireless services, which are taxed by federal, state, and local governments at relatively high rates in the range of 14%-25%. The paper concludes such taxes are a much greater drain on the economy than their direct costs. The taxes identified in this paper cost the economy $2.56 billion more than the $4.79 billion they raise in tax revenues. These taxes are raised from wireless consumers and thereby suppress demand for service, imposing an efficiency loss on the economy of $0.53 for every $1 currently raised in taxes. Prospective taxes will impose an efficiency loss of $0.72-$1.14 per additional dollar of tax revenue raised.

Suggested Citation

  • Jerry Hausman, 1999. "Efficiency Effects on the U.S. Economy from Wireless Taxation," NBER Working Papers 7281, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:7281
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    References listed on IDEAS

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    1. Auerbach, Alan J., 1985. "The theory of excess burden and optimal taxation," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 2, pages 61-127, Elsevier.
    2. Martin Feldstein, 1999. "Tax Avoidance And The Deadweight Loss Of The Income Tax," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 674-680, November.
    3. Jerry Hausman, 1998. "Taxation by Telecommunications Regulation," NBER Chapters, in: Tax Policy and the Economy, Volume 12, pages 29-48, National Bureau of Economic Research, Inc.
    4. Hausman, Jerry, 1999. "Cellular Telephone, New Products, and the CPI," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(2), pages 188-194, April.
    5. Jerry Hausman, 1998. "Taxation by Telecommunications Regulation," Books, American Enterprise Institute, number 53052, September.
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    Cited by:

    1. Cordes, Joseph J. & Kalenkoski, Charlene & Watson, Harry S., 2000. "The Tangled Web of Taxing Talk: Telecommunication Taxes in the New Millennium," National Tax Journal, National Tax Association, vol. 53(n. 3), pages 563-88, September.
    2. Amanda Starc, 2014. "Insurer pricing and consumer welfare: evidence from Medigap," RAND Journal of Economics, RAND Corporation, vol. 45(1), pages 198-220, March.

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    More about this item

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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