by Sherry Conway Appel

Lawmakers on Capitol Hill were briefed last week on the findings of a new study just released by a coalition of local government associations, including NLC, that refutes assertions by the telecommunication industry that it is overtaxed. The new information is crucial to fighting any attempts by Congress to restrict or eliminate the ability of local and state governments to tax certain telecom services.

The new coalition study, ?Local Government Perspective on Telecommunications Taxes,? found that if all telecom-related taxes are eliminated, state and local governments could lose approximately $8 billion in revenues every year and the jobs of more than 150,000 teachers, police officers and firefighters could be on the line. Eighty-one percent of all cities with populations over 50,000 would see their tax revenues decline. As a result, they would either be forced to cut services to local residents or raise taxes on other taxpayers.

Currently the Senate is considering a telecommunications reform bill that includes provisions that would restrict two sources of revenue for local governments, which NLC worries could represent the first step toward eliminating all telecom-specific state and local taxes. Some policymakers appear to be basing their support for telecom tax reform on a study funded by the telecom industry (the Council on State Taxation?s ?2004 State Study and Report on Telecommunications Taxation, or COST Study). NLC and its partner organizations took this message to Capitol Hill last week, meeting with Congressional representatives to urge them to take a closer look at industry accusations when compared to the facts.

?We stand for fairness for all industries involved in providing telecommunications services,? said Arvada, Colo., Mayor Ken Fellman, former head of NLC?s Information Technology and Communications Committee and a member of the National Association of Telecommunications Officers and Advisors? board of directors. ?There should be no favoritism to any one competitor so that we can have true competition. In addition, we are elected to be the watchdogs for our communities and have a responsibility to ensure that our local economic futures are secure. Any restriction on local authority to levy fees or taxes will have serious and negative long-term impacts.?

The study debunks claims by the telecommunications industry that it is unfairly taxed relative to other businesses. Instead, it shows that the industry pays essentially the same level of property taxes as other businesses, and, in some cases, lower corporate income taxes than many ?general businesses.?

The telecom industry also ignores that it is taxed at significantly lower rates than some other industries such as the utility industry.

?I believe the report issued by our coalition will have an impact on the ongoing debate, since it directly and accurately challenges the false premise that telecom companies have put forward that they deserve preferential tax treatment at the expense of municipal taxpayers,? said Donald J. Borut, NLC executive director.

The coalition includes the U.S. Conference of Mayors, the National Association of Counties, the National Association of Telecommunications Officers and Advisors and the Government Finance Officers Association, as well as NLC.

In releasing the coalition study, Dearborn, Mich., Mayor Michael A. Guido, president of the U.S. Conference of Mayors, said, ?This study is important because it points out the flaws in the telecom industry?s 2004 COST Study, which significantly overstates the average state and local tax rate for the telecom industry.

?It would disturb me if any member of Congress would allow the COST Study to have influence over the debate to change our taxes on communications.? 

Among other flaws that the coalition found, the COST Study omits essential information and improperly lumps taxes together with various kinds of user fees, including right-of-way fees ? which pay for the industry?s use of public streets and sidewalks. The COST Study also ignores other special benefits the telecom industry receives under state and local law that other businesses do not.

Montgomery County, Md., Council Member Marilyn Praisner, a member of the National Association of Counties Board of Directors and Chair of the National Association of Counties? Telecommunications Steering Committee, said, ?If Congress accepts the telecom industry?s claims and changes their tax rates based on the industry?s figures alone, the revenue loss to state and local governments would be significant.?

The coalition maintains that local governments are open to simplifying telecom taxes for the 21st century but do not agree that ?reform? should be a disguise for federal preemption of state and local government taxing authority.

The group is also concerned that if the telecom industry succeeds in getting preferential treatment, other industries may ask Congress for similar special exemptions from state and local tax authority, which could pose a dire threat to state and local tax revenues.