Virginia May Revise Telecom Taxes

The Washington Post reports:

A House of Delegates panel passed a bill Monday that would revamp the way Virginia taxes telecommunications services in light of the new phone, cable, wireless and Internet options available to consumers.

The new tax system would replace what supporters of the bill call an antiquated mix of local levies placed on services that Virginians use to communicate and to receive information and entertainment.

The proposal before the General Assembly would impose a flat 5 percent tax statewide on various communication and information technologies and would eliminate the taxes imposed by each locality, which in some cases reach 35 percent on local calls, mobile services and paging. It would also eliminate cable franchising fees. The measure would impose taxes on monthly satellite television bills, Internet calling technology and long-distance service, which currently aren't taxed.

"Fifty years ago the only way to communicate with others was with a plain old telephone line," said Del. Samuel A. Nixon Jr. (R-Chesterfield), the bill's chief sponsor. "Technology has evolved but our taxing policies have not."

"It's fair, it's balanced and adheres to the principles of taxes being low as possible and broadly applied as possible," Nixon added. He said Virginia has the highest taxes on basic telephone service in the nation...

Supporters said the taxes would raise the same amount of revenue -- about $425 million annually -- that localities now receive from local taxes and franchise agreements. A new state law would not affect federal fees.

This sounds like a good idea if it does a good job of equalizing taxes between the various technologies. The nature of the opposition suggests this is the case:

The effort faces serious hurdles again this year. Satellite companies have lobbied hard to defeat the bill, arguing that their customers are unfairly bearing the brunt of the state's attempt to standardize the way the industry is taxed. There are two dozen states that tax satellite service.

Several rural lawmakers, including Sen. William C. Wampler Jr. (R-Bristol), chairman of the powerful Senate Commerce and Labor Committee, have said that their constituents would be harmed by the creation of a tax on satellite service, which many rely on because cable does not reach their areas.

"The bill puts the interests of local governments over citizens," said Del. Benjamin L. Cline (R-Rockbridge), who said he voted against the bill because he is concerned about placing a new tax on satellite users.

I am concerned that satellite users aren't taxed. They haven't explained why cable should be taxed while satellite service is tax free. The tax might be new, but so is the service. Greater uniformity in taxes will help maintain the tax base while avoiding discrimination against established technologies.

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