Mountain View Voice

Opinion - August 6, 2010

Phone tax decision up to voters

Given the sour economy, the City Council and administration did the right thing in acting to protect what is known as the phone tax, an important source of revenue — $1.9 million a year.

The council broke their summer recess last week to place a revised version of the 40-year-old tax measure on the November ballot. Now it will cover modern-day technology like Skype's voice over internet protocol and broaden the measure to include interstate and international calls.

The city is billing this action as a "modernization" rather than a tax increase. It's true, unless you have been escaping taxation on the services that will be taxed if voters approve changes in the November election. A consultant told the council in April that a revised tax could bring in several hundred thousand dollars in additional revenue. Nevertheless, it is expected that most residents will agree that this utility tax needs an update, especially now when the city's income from other sources is lagging.

In its current form, income from the tax has declined $50,000 in the last year, and city officials want to stop further deterioration. The council agreed on a 6-1 vote, with only John Inks opposed. He said he was unhappy with the ballot language, saying that the question voters will be asked "doesn't disclose much."

Councilwoman Laura Macias did not see a problem. "Essentially, what we're saying is if you make a voice call, there is a tax to it."

Advance work done by the city's consultant said the tax got a 68 percent approval rating from potential voters, which gives it a very good chance of passing, although one resident told the council that he thought the ballot language was not clear, especially the use of the word "modernization" when referring to the tax policy, not phone hardware.

The city's analysis found that some businesses may see a substantial increase in their phone taxes, especially those that heavily use VOIP. In one unusual example, a mid-size business that specializes in providing teleconferencing services estimated an increase in its phone taxes from $100 to $600 a month.

On the other hand, there is not likely to be any tax increase on the majority of cell phone bills, most of which already apply the tax to all calls. Also, the city wants everyone to know that Internet access, e-mail services and digital downloads are not covered in the rewrite of the phone tax.

Federal law prevents service providers from taxing Internet data, even though it is largely indistinguishable from VOIP data. It will be up to users and service providers to make sure that Internet data is not taxed when Internet service is bundled with VOIP. For users of their bundled Internet-VOIP packages, Comcast charges the phone tax on a set portion of their bill every month.

The initial decision to impose this tax was made 40 years ago. The ballot measure will simply make sure it continues to be applied fairly over all forms of voice communication.

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