AUSTIN, Texas – Texas is loaded up on telecom taxes. Although a national leader in telecom deregulation, through measures like the statewide video franchise, Texas is also a national leader in telecommunications taxes.

Texas consumers pay an average tax of over 29% on their monthly phone bills – local governments take about 11.32%, the state 13.97% and the federal government a little over 4%.

“Besides the high rates, another problem is the disparate taxation of rapidly converging telecommunications services,” said Bill Peacock, director of the Center for Economic Freedom at the Texas Public Policy Foundation, a non-profit, non-partisan research institute based in Austin. “Both of these lead to inefficient decisions by consumers and producers, and increase costs in the system.”

The recently released report, “Texas Telecommunications Taxes: An Overview,” is the first in a series of papers to be published by the Foundation covering telecommunications taxes and fees in Texas. Upcoming papers will examine franchise fees and universal service.

“It is worth noting that Texas, a state which seeks to preserve low-cost telecommunications services for its citizens, has one of the highest tax rates in the country,” says Peacock, who authored the report.

The paper makes the following recommendations which would save Texas taxpayers over $382 million per year:


  • Sales Tax. Eliminate the “tax on a tax” aspects of state and local sales taxes. Taxpayer Savings: $90 million per year.
  • Telecommunications Infrastructure Fund Fee. Eliminate the TIF fee. Taxpayer Savings: $200 million per year.
  • Universal Service. Bring rates for all basic residential phone service to parity with urban rates and provide for a corresponding reduction in Universal Service charges. Taxpayer Savings: $90 million per year.
  • Municipal Franchise Fees. Restructure these fees to more closely reflect the cities costs of managing the right-of-way. Taxpayer Savings: Unknown.
  • Private Network Service. Eliminate mandated provision of Private Network Service. Taxpayer Savings: $2 million per year.