Jul 21, 2018 | Updated: 09:54 AM EDT

US Mobile Internet Consumption Doubled, Declining Landline Usage Affects State and Local Taxations

Jul 08, 2014 11:18 PM EDT

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Mobile Internet usage has doubled in the U.S. during the last two years, but it has dented state and federal agencies' taxation efforts.

According to CTIA - The Wireless Association, states typihave traditionally collected "hundreds of millions" of dollars per year on landline taxation. With more people using mobile Internet to communicate, such as Facebook, FaceTime, Skype and Twitter, landline usage has slipped. Based on five years of data ending in late 2012, Bloomberg Industries noted phone lines decreased from 161.8 million to 140.9 million.

With fewer landlines, the government is losing money. Due to the Internet Tax Freedom Act of 1998, signed by President Bill Clinton, state and local tax agencies cannot collect fees from Internet data usage. The 1998 Act was created to help increase innovation in the Web.

As Bloomberg Businessweek noted, the Illinois Department of Revenue revealed its telecommunications taxation was $572 million for the year ending in June 30, which is down $98 million from 2011. In Florida, telecommunications taxes declined by 6 percentage points between 2011 and 2013. Within Phoenix, Arizona, phone usage, by landlines, dropped by 7.2 percent in 2013.

According to the National Conference of State Legislatures' manager for state-federal relations, Max Behlke, via Bloomberg, the decline of landlines is a "concern" for states and localities. He added that landlines have been "one of the most reliable revenue streams.

States have tried to find taxing alternatives for the landline losses. Since the Internet Tax Freedom Act doesn't cover cellular voice plans and text messaging, states have placed taxes on them. In some parts of the U.S., more than 18 percent of a customer's monthly phone bill is from the state. In Baltimore, residents are taxed $4 per month for each mobile phone on their account. Since text messaging can be taxed, people have resorted to other methods to send texts. "Untaxable" multimedia messaging, such as Facebook's WhatsApp, increased by 29 percent, while general text messaging dropped by 13 percent from 2012 to 2013.

Taxing non-telecommunication services has also helped states experiencing landline losses. According to Illinois' Department of Revenue spokesperson Susan Hofer, cigarette and liquor taxation increases and shorter library hours have benefitted the state.

According to The Centers for Disease Control and Prevention (CDC), 4 out of 10 U.S. households only use a mobile phone. The AP noted the CDC's report shows mobile phone usage, than landlines, increased by twice the rate than five years ago. Households only using mobile phones are reportedly on an increase by 5 percent per year.

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