Chicago cellphone taxes highest in nation

Everywhere they look, Chicagoans see ads urging them to switch their cellphone service. One major provider urges customers to purchase a four-line family plan with all the texting, talking and data one could possibly use for only $100 per month. But the ad fails to mention that a Chicago family would actually have to pay...

Everywhere they look, Chicagoans see ads urging them to switch their cellphone service. One major provider urges customers to purchase a four-line family plan with all the texting, talking and data one could possibly use for only $100 per month. But the ad fails to mention that a Chicago family would actually have to pay $135.42 per month to receive the service.

How could that be?

Chicago now has the highest effective tax rate on cellphone service in the nation – a combined effective rate of more than 35 percent on a four-line family plan with a base cost of $100. Service providers don’t mention the additional tax burden when they market their plans.

A Chicago couple that decides to share a two-line plan priced at $75 will also pay a nation’s high 30.2 percent more in taxes. That means the couple will pay nearly $100 ($97.66 to be precise) for their $75 plan.

Chicagoans going solo on a one-line economy plan priced at $50 also must shoulder the highest tax burden in the nation at a combined tax rate of 27.6 percent. They will have to pay $63.81 per month for the $50 plan.

After a long, steady run among the top five cities contending for bragging rights to the nation’s highest cellphone taxes, Chicago jumped to the front on Sept. 1 when its 911 surcharge increased by 56 percent, raising the monthly per-line fee to $3.90 from $2.50. Monthly cellphone bills from service providers now include the increased charges.

Chicago leads in not one, not two, but three different cellphone-tax categories. In addition to boasting the highest total combined cellphone tax burden in the nation, Chicago’s 7 percent municipal tax plus the $3.90 per-line surcharge makes it the highest municipal cellphone tax in the nation on most standard plans. And, at $3.90, Chicago’s surcharge ranks as the highest 911 surcharge in the nation by far.

The Tax Foundation recently prepared a comparative study which brought this news to light. The study showed that Chicago, Baltimore, New York, Seattle and Omaha, Nebraska, are the five large cities with the highest combined tax rates in the nation. In reality, Seattle’s smaller neighbor Olympia, Washington, has an even higher combined rate than Seattle. Few other cities come anywhere close to the tax burdens imposed in these cities.

Based on the combination of percentage taxes and flat-fee charges identified in the Tax Foundation study, the tax burden in Chicago is the highest among the five cities on a $50 one-line plan, a $75 two-line plan, and a $100 four-line family plan.

Olympia gives Chicago some competition for highest rates on higher-priced plans with fewer lines, and so does Baltimore on lower-priced plans with more lines. This results from each city and state having a unique combination of taxes based on percentage rates and per-line surcharges based on a flat fee.

Olympia owns the highest combined tax rate in the nation at 23.62 percent in tandem with surcharges of 95 cents per line. Baltimore, on the other hand, has a combined tax rate of 11.82 percent, but has the highest surcharges in the nation, at $5.11 per line. Chicago, with its 19.82 percent combined tax rate and its $3.90 surcharge per line, is high on both counts.

Thus, Olympia will have a higher effective tax rate than Chicago on a one-line plan that costs more than $77 per month, or on a four-line family plan that costs more than $310 per month. And Baltimore will have a higher effective tax rate than Chicago on a $50 per month plan covering at least four lines or a $100 plan that covers at least 7 lines (if you can find such plans).

But on standard plans with moderate rates, no other city beats Chicago for taxing cellphone service.

So the next time Chicagoans see an advertisement for a family plan at a price that seems too good to be true, know that it is. And remember to count the cost of the unmentioned, barely believable taxes that add another 35 percent to your monthly bill.