Consumers in Massachusetts could see their cable and other telecommunications bills increase substantially if a property-tax revision is passed by the state legislature, according to telecommunications-company officials.
The businesses argued that the proposal is a new tax that could add up to $360 annually to a household’s communications bills. On cable, that could be between $0.75-$2.50 per month, and up to 15% on some landline local phone bills.
The sector currently generates about $450 million per year in local fees and taxes, as well as state sales and withholding taxes, business leaders said.
Telephone companies and cable operators have partnered in an attempt to fight off House Bill 2408, which would apply property taxes on infrastructure such as poles, underground conduit and wires.
The coalition includes Adelphia Communications Corp., Associated Industries of Massachusetts, AT&T Corp., Charter Communications Inc., Cingular, Comcast Corp., the Greater Boston Chamber of Commerce, Massachusetts Business Roundtable, Massachusetts Network Communications Council, Massachusetts Software Council, MCI Inc., the New England Cable Telecommunications Association, Nextel Inc., Sprint Corp., Time Warner Cable, Verizon Communications Inc. and Verizon Wireless.
The proposal is being spearheaded by cities -- especially Boston -- which have seen their revenues decline in the past year because telephone companies have accelerated depreciation of equipment or transferred ownership titles out of state in order to avoid taxes. The law is needed to close "loopholes," according to municipal officials.
Boston Mayor Thomas Menino, who drafted the bill, asserted that the property-tax burden for commercial and residential taxpayers is too high because of the “unfair advantage” of some telecommunications companies. He added that telecommunications companies have used the current tax policy to lower their Boston assessments by $439 million during the past two years.
“The telecom companies will try to tell you that if this legislation is passed, they will be forced to pass their increases on to their customers. Well, the telecom companies saved $31 million in [fiscal-year 2005] because of this loophole. Did customers see their bills go down? No,” he added.
In a public hearing before the House Revenue Committee on the bill June 21, business leaders said their tax-saving tactics were triggered by a state Supreme Judicial Court ruling this year that did away with tax exemptions on telecommunications companies. As a result, cities such as Boston hit the companies with huge tax increases. The companies had to find a way to cut their tax burdens or they would have had to pass through massive rate hikes, they argued.
Massachusetts’ customers already pay $198 million per year in state sales taxes on communications services, according to the NECTA. Current tax policy was passed to encourage technology deployment and innovation, business officials said. As a result, telephone and cable companies invested $1.6 billion in the state during 2004, deploying new wireless and wireline technology.
The companies also argued that the proposal would unfairly impact rural and suburban towns. They will pay higher service rates because of taxes applied by bigger cities such as Boston, where the companies have hubs, call centers and other taxable assets.
The House leaders have not set a date for a floor vote on the proposal.