If the proposed ordinance is approved, phone taxes will go down, but a wider array of technologies could be taxed in the future.
By Nora Fleming / Special to The Malibu Times
At the municipal election on April 8, Malibu residents will be able to vote for or against an ordinance that will lower the rate of the current telephone utility tax from 5 percent to 4-1/2 percent, but allow the city to apply new taxes to a larger range of communication services in the future.
As it stands, the telephone tax has not changed since it was adopted in 1991. Last year, the Malibu City Council voted in favor of placing City Attorney Christi Hogin’s proposal to put a new ordinance, which included technologies not available in 1991, on the April 8 ballot.
“There have been some decisions in some federal court lawsuits that question the validity of the tax that has been collected since the city began,” said Mayor Jeff Jennings in regard to putting the new ordinance on the ballot next month.
Some of this litigation is still pending and could mean if Malibu doesn’t change the existing ordinance, they will not have a city phone tax at all, without a federal excise tax to base it upon.
Hogin estimates that more than $1 million in city revenue, or 4 percent of the general fund, is obtained from the current telephone tax, an amount the city could stand to lose if voters are not in favor of the new ordinance.
Voters will select “yes” or “no” to adopting the new ordinance in a small box titled section D on the main page of the ballot. Several pages after that is Hogin’s own analysis of the ordinance, available for voters to read in greater detail.
Councilmember Ken Kearsley predicted strong community debate over the proposed change to the phone tax, but so far there has been little.
“Taxes are taxes … it’s not much on radar screen,” Kearsley said. “I hope it passes; we need the revenue for the parks.”
Ryan Embree, a 25-year Malibu resident and former Public Safety Commission member, however, voiced his concern over the ordinance at a council meeting in November of last year and is still opposed to it.
“It’s disingenuous to propose this tax. There’s been less than a good faith effort to estimate its impacts,” Embree said in a recent interview. “Many times the city does not scenario test its proposals and it ends up with the wrong results.”
Embree said he believes that by increasing the number of technologies taxed, people’s phone bills may be substantially higher with the new ordinance. Additionally, because the proposed ordinance will allow new technologies to be taxed in the future, Embree said the city government could derive more profits.
“A lot of things we don’t tax and we can’t tax,” Jennings said. “If the [federal] law changes in the future, it might present an opening where the city could tax those things. Right now it will probably be revenue neutral, but potentially it could cause some sort of an increase,” he said.
While Hogin’s ballot explanation states the tax will not apply to digital downloads and services not allowed by federal law to be taxed, which as of now include the Internet and broadband services, there is no list of the services that will be taxed if the ordinance is approved.
A few are mentioned in Hogin’s report to City Council and these include cellular phone services, such as call waiting, voice mail, directory assistance, text messaging, three-way calling and call forwarding.
The ordinance in Malibu is written as a “tax reduction,” lowering the tax from 5 to 4-1/2 percent. In a memorandum to the City Council, Hogin stated, “It is important to note that a reduction in tax rate can be misunderstood by voters because it may not result in an actual reduction in the actual amount of taxes paid.”
Hogin did not return repeated phone calls from The Malibu Times to answer questions about the complicated ordinance.
Malibu’s proposed ordinance is similar in reasoning and presentation to many others in cities throughout the country, including the City of Los Angeles.
On Super Tuesday, Los Angeles resident voted 66 percent in favor of Proposition S, which reduced the rate of telephone tax from 10 percent to 9 percent, but widened the types of services taxed and empowered the city government to broaden the scope of the tax when new communication technologies are invented.
Many believed L.A.’s vote in favor was due to pressure from city government about a potential $248 million in revenue.