Cell phone, internet, cable and landline bills for Massachusetts residents will increase by as much as 15 percent if state legislators pass a new property-tax revision on the telecommunication industry this fall, according to representatives from six major companies.
AT’T, Cingular, Sprint, Comcast, Verizon and Nextel officials all said they would be subject to price increases if the tax changes pass.
“The additional burden will fall on the shoulders of millions of consumers and businesses who purchase telephone, Internet and cable services,” said Carol Meier, director of the Massachusetts Network Communications Council. “This bill represents a $140 million tax increase for the communications industry and consumers.”
Telecommunications customers in Massachusetts already pay $198 million per year in state sales taxes, which should not be compounded by adding a new tax that will raise the cost of living, Meier said.
The proposal could cost an additional $360 annually to the average Massachusetts household’s communications bills. In other words, cable bill would increase between $0.75 and $2.50 per month, and phone bills — cell phones included — would rise up to 15 percent, according to a statement released by the Telecommunication Coalition Against House Bill 2408, the bill that contains the proposed taxes.
Boston City Assessor Ron Rakow aggressively disputed the telecommunication industry’s claims, saying that the state tax rates and phone bills had no correlation.
Rakow cited research done by the Massachusetts Association of Assessing Officers.
“The telecom industry has been floating the threat of bill increases in an attempt to scare consumers,” Rakow said. “Our hard data shows that state taxes are not directly linked in any way to the rise and fall of consumer’s phone bills. For example, there was a 50 percent drop in Verizon’s tax bill in Massachusetts last year, but their phone rates have gone up.”
But Alan MacDonald, executive director of the Massachusetts Business Roundtable, said the assertion that state taxes have no effect on phone rates was implausible.
“I don’t know how that could be,” MacDonald said. “If you have an extra overhead expense, the consumer has to pay somehow. New taxes levied by the state will be passed on to the customers in some manner. There is no way that the cost can be just absorbed on the company level.”
Verizon Vice President Joe Zukowski agreed that new taxes would force the company to raise rates for customers.
“There’s no way Verizon can absorb the tax,” Zukowski said. “We’d have no choice but to pass it on to the customers.”
Telecommunications representatives argue that the industry is beneficial to the state economy, generating more than $450 million each year in local and state taxes and fees.
“We’re an industry that does what policymakers want,” Zukowski said. “We create good paying jobs and bring in millions each year for the state.”
The controversial bill levies taxes on communication infrastructure such as poles, underground channels and wires, which have not been taxed in the state since 1915.
Mayor Thomas Menino said he believes the bill will stimulate the state economy by lifting a significant tax burden off other businesses and community residents.
“Telecom companies are using an outdated tax exemption as a loophole to avoid paying property taxes,” Menino said at a press conference in July. “I filed this bill to level the playing field among businesses, and help ease the commercial and residential property tax burden.”
According to MAAO’s research, the average Massachusetts household will save $185 a year, and businesses tax bills will decrease by 2 percent. But MacDonald countered Menino’s predictions about the bill’s economic consequences.
“This doesn’t make any economic sense,” MacDonald said. “This initiative will only dampen the state’s economy, not advance it forward.”
Because telecom infrastructure is vital for companies to grow, a new tax on telecom industries will lower investment incentives for businesses and drive them to other states. Any gains in tax relief will be nullified by rising telecom fess, according to MacDonald.
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.
“If this bill passes, it’s like bait-and-switching the companies that have invested here. You can expect to see a fallout from that,” said MacDonald.
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