You can hear me now
As Congress considers reforming the nation’s telecommunications laws, local governments are preparing for the battle. The addition of several tax-related provisions to a reform bill that is being considered by the Senate has local officials concerned about the future of billions of dollars they collect annually from taxes and fees paid by telecom companies, says Jeff Arnold, deputy legislative director for the Washington-based National Association of Counties (NACo).
Even if it passes, the current legislation does not eliminate all funds paid to local governments by telecommunication companies over and above general business taxes. Nevertheless, local governments could lose as much as $8 billion annually, according to a study released last month by a coalition of city and county groups, including NACo, the U.S. Conference of Mayors (USCM) and the National League of Cities (NLC).
The report says that the $8 billion annual loss would be staggering and would cause local governments “to shift tax burdens from telecom companies to other taxpayers or else cut budgets by an amount equal to the combined salaries of more than 150,000 teachers, police and firefighters.”
The report also noted several inaccuracies in a 2005 study released by telecom companies that concludes they are overtaxed compared to other businesses. For example, some of what telecom companies considered taxes in their study actually are fees for services provided, says Arvada, Colo., Mayor Ken Fellman. Telecom companies pay fees to local governments for such things as using public rights of way. Those fees are appropriate, Fellman says, considering the costs their services impose on communities. He also says that the telecom industry’s study failed to factor in the tax benefits they are allowed.
“Telecom companies burden the public rights of way, and there’s a cost to that,” says Dearborn, Mich., Mayor and USCM President Michael Guido. “For us, those taxes and fees are a different source of revenues. They come in handy at a time when local governments are having a hard time securing revenues.”
Local officials say they realize tax policy reforms for the telecom industry are needed, and they are willing to work with the industry to make the changes. Citing that they must “have revenues sufficient to provide critical public services,” the local governments’ report says they will only accept modifications that are revenue neutral and ultimately do not decrease their income.
Officials also are urging the reforms to those policies be decided locally rather than at the federal level. “We’re willing to look at and revise our policies, but they have to be done based on communities’ specific needs,” says Marilyn Praisner, vice president of the Montgomery County, Md., Council.
Arnold says the bill likely will not get to the floor for a vote this year for several reasons, including the controversy of the tax-related provisions that have been added. Even if it does, he says it is almost certain there will not be a provision that reduces the total amount of taxes paid to state and local governments by the telecom industry. However, Arnold is confident the industry “will come after us next year — that’s clear.”
The author is the Washington correspondent for American City & County.