Opponents fear UUT could drive away jobs
By DAILY PRESS STAFF
DOWNTOWN The union representing city employees is backing a measure on the November ballot that would amend the current Utility Users Tax on telephone services, something which City Hall believes is necessary to protect roughly $12 million in funding.
The Coalition of Santa Monica City Employees, which represents over 1,500 non-sworn workers, announced its support for Proposition SM on Monday.
“By changing the existing UUT, Proposition SM protects vital city services for all residents and city employees,” said coalition representative Lauralee Asch. “Santa Monica could lose up to $12 million in revenue, which would not only hurt essential community programs but also decrease public safety. The coalition is strongly committed to ensuring that Proposition SM passes on Nov. 4.”
The UUT was first adopted in 1969. The current tax rate is 10 percent. The revenues from this tax are deposited into City Hall’s general fund and pay for services such as police, fire and paramedic and for city programs including those in recreation, the environment and the schools.
Since the existing law was written nearly 40 years ago, its language does not match the many changes in communication services and technology that have occurred since.
The existing UUT law relies for its interpretation and enforcement on definitions and policies created over many years under the Federal Excise Tax. This federal law was repealed two years ago. The repeal complicates interpretation and enforcement of the existing UUT. One result of both the repeal of the federal law and the age of the existing UUT law is that not all persons or businesses are being taxed the same even if they use the same or similar equipment or services.
Also, since the repeal, some California cities, with utility tax ordinances almost identical to the city’s, have been sued because the repeal led to disputes on how to apply these cities’ laws to current communication services and technology.
Should City Hall be sued, or should a decision be reached in one of these lawsuits that affects how the city’s law is applied, the city’s UUT revenue could be reduced.
To address these issues the proposed ordinance amends the current law and adds various definitions to the UUT law, including a definition for “telecommunication services”. The proposal applies the UUT to all telecommunication services regardless of the technology, equipment or services used.
The proposal also removes all references to the Federal Excise Tax. The proposal makes no change to the tax rate. The existing tax rate is kept at 10 percent.
Exactly how, if at all, the proposed ordinance would affect the amount of tax paid by any taxpayer would depend upon a number of factors, including the terms of the services agreement with the service provider and whether the provider has to change its billing and collection practices.
The proposal provides an exemption for low income senior citizens and for disabled persons. The proposal also provides an exemption for services that cannot be taxed under federal or state law as well as an exemption from tax for digital downloads, such as music, ringtones, games, and similar digital products, according to an impartial ballot statement prepared by the City Attorney’s Office.
Opponents of the measure said residents are currently taxed too much and City Hall needs to learn how to better manage funds than impose more taxes. They also claim that the tax would make Santa Monica even more expensive to do business in, driving away job opportunities.
Originally published in the Santa Monica Daily Press print edition on September 16, 2008. Read the original PDF.