Measure aims to modernize tax on telecommunications
A little-known measure on the local fall ballot that would expand a tax on telecommunications is attracting opposition.
A group of residents are mounting an informal campaign against a proposed modernization of the Utility Users Tax, arguing that despite what City Hall claims about the measure producing a minuscule effect on residents and businesses, it will take more out of consumers’ pocketbooks.
“This city said this is an update, which is not true,” Peter Tigler, an opponent of the measure who helped create a Web site called KeepInformationFree.com, said.
A 10 percent city tax is currently charged on all electricity, natural gas, cable, water/wastewater and telecommunications bills whose accounts are based in Santa Monica. The problem for City Hall — and the reason for the measure — lies specifically in the language defining telecommunications, which officials say is outdated and has not kept up with the technological changes, leaving certain sectors like businesses who use T-1internet connection, untaxed.
335,“It is a question of equity,” Kate Vernez, the assistant to the city manager for governmental relations, said. “If people are using services, it’s equitable to make sure everyone is paying their fair share.”
City Hall could stand to lose $12 million in existing revenue if the voter-approved measure fails this November.
While city officials claim that the tax rate will remain the same at 10 percent, impacting most consumers minimally, those who oppose the measure say there would be a tax increase overall, arguing that the proposal would expand the law to cover the Internet — including downloads — satellite and all wireless services.
“You don’t have to necessarily have a phone number or address in Santa Monica,” Tigler said. “Just being here and originating a call or receiving a call here can get you taxed.”
Tigler added that the measure presents privacy issues, giving authorities the ability to track Internet activities, including online subscriptions.
“This is not an update, it’s an expansion and redefinition,” Tigler said.
City officials disputed the report, pointing out that satellite and the Internet — including downloads — are neither currently nor will be taxed under the measure.
What the redefined UUT will do is begin taxing text messages, pages and voicemails that are “unbundled,” meaning they aren’t included in the caller’s monthly plan. Carol Swindell, the finance director for City Hall, pointed out that most cell phone users subscribe to plans that already include those services at a flat rate, the packages already being taxed under the existing UUT structure.
Swindell also refuted claims that a cell phone user whose account is not based in Santa Monica would be charged a tax by City Hall for making or receiving calls within city limits.
Many cities have updated their own UUTs through voter-approved initiatives, which is required under Proposition 218. Similar opposition campaigns have been waged against most, according to Mike Madrid, a consultant to the League of California Cities, which is an association of city officials from across the state.
The most high-profile campaign took place earlier this year when Los Angeles city officials placed a UUT update on the ballot, opponents arguing that the proposal would tax the Internet, which turned out to be false, Madrid said. The measure passed.
“It’s a standard ploy people will use because they know people would be concerned about that,” Madrid said.
Aside from the recent opposition campaign, the measure has gotten on the ballot with relatively little stir from the public.
Consumer Watchdog, which is based in Santa Monica, has not taken a position on the measure.
Carmen Balber, the consumer advocate for the organization, said that the measure is basically logical.
“The reality is when the telecommunications tax originally passed, it was intended to tax telecommunications itself,” Balber said.
She added that while cities tend to try and sell similar measures as a tax reduction, it is in reality an increase because it’s charging a service that previously wasn’t covered before.
City Hall has spent more than $33,000 sending out two mailers on the ballot measure, the first distributed last month, the second sent last week. The literature was created by city staff.
Vernez said the fliers were not in response to the Web site.
“We just want to get the facts out there,” she said.
The measure also aims to correct confusion that arose after the federal excise tax — for which the local UUT was modeled — was repealed on almost all telecommunications services in 2006. The change caused issues in interpretation of the local law, questions as to whether cities that mirrored their UUT after the federal excise tax could still make assessments on telecommunications.
“We want to make sure that this tax as it exists is approved by voters and is one that tells telecommunications that they need to collect and collect equitably,” Swindell said.
Jump hedline: Measure aims to modernize tax on telecommunications
Suggested pullquote: “This city said this is an update, which is not true.”
Originally published in the Santa Monica Daily Press print edition on August 14, 2008. Read the original PDF.