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Letter


Approach Telecom Tax Reform the Right Way!
An Open Letter to the Georgia General Assembly

March 24, 2011
By Andrew Moylan

Dear Legislator:

     On behalf of the National Taxpayers Union’s (NTU’s) nearly 8,300 members in Georgia, I urge you to refrain from any action that would add to the telecommunications tax burden or unfairly discriminate against particular types of telecommunications services as the General Assembly considers proposals from the Special Council on Tax Reform and Fairness for All Georgians. Fairer, lower taxes for all participants in this sector should be the overarching goal.

     Telecommunications make up an essential part of daily life in Georgia and will be a key element in restoring and building out Georgia’s economy.  These services should be taxed less, not more, for the benefit of all businesses and consumers. Whether they subscribe to cable or satellite television, wireless or wireline, their choices should not be determined by onerous government tax policies.

     Most would agree that the state’s antiquated telecommunications tax regime needs to be modernized to reflect new technologies and usage trends. Furthermore, some argue that a new tax regime is warranted in order to level the business playing field between various industries.

     Although tax modernization can be a worthy endeavor in itself (certainly, no one seriously argues that the state should consider taxing telegraph services), it should not serve as an excuse for raising revenues or discriminating against a particular industry. Regrettably, government has for too long used the tax code and its regulatory power to pick winners, while consumers forced to pay higher prices are the ultimate losers.

     For example, franchise fees for cable television were supposedly instituted to reflect a cost of doing business – in this case, using public rights of way for cable wires. Unfortunately, the lopsided and frequently inequitable fee negotiation process has led to many instances where cable providers are paying too much to local governments. It has also led to satellite television service providers, who do not utilize public rights of way, being targeted with taxes and fees whose incidence does not fit their business model. Similarly, wireless phone service is now the target of a host of taxes and fees, such as per-line and “E-911” charges – so much so that overall they now account for almost a quarter of a subscriber’s bill. Meanwhile, wireline service is still largely governed by taxes and rules imposed during the age of rotary dialing.

     Clearly, the path towards a more modern telecommunications tax system is difficult. But it is not impossible. Economists from across the political spectrum believe that the best structure for taxation is built upon a broad base and low, stable rates – a structure designed to meet the basic goal of raising revenue, not to influence public behavior. Thus, the way to achieve tax fairness and neutrality for telecommunications in Georgia is through reducing and reforming taxes for telecommunications service, not through raising taxes or imposing new ones on other types of businesses. A case in point is the Council’s recommendation to afford telecommunications equipment the same tax treatment as other businesses’ equipment investments. Assuming Georgia’s tax law will continue to reflect a sales and use tax exemption for inputs utilized to provide goods or services (a common way of avoiding double taxation), it makes perfect sense for the provision to apply broadly. Further steps at reform will require equally thoughtful deliberation, and the final package may need to include elements that the Council had not considered.

     We commend you for the discussions you have held on proposals from the Special Council’s blueprint. We firmly believe that the time is now for Georgia to embark on the path to a simpler, fairer, and pro-growth tax system that benefits all Georgians. To that end, we stand ready to work with you in developing a telecommunications reform plan that reduces taxes, respects and accurately accounts for costs of various business models, removes regulatory barriers, and treats every market entrant fairly.

Sincerely,

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Andrew Moylan
Vice President of Government Affairs