WASHINGTON-The Virginia state legislature last week passed a bill creating what is believed to be the first statewide communications flat tax in the nation, but Gov. Tim Kaine (D ) did not immediately indicate whether he would sign the measure.
The 5-percent tax would apply to wireless, wireline, Internet phone and video services. Mobile-phone and other telecom consumers in the state are expected to see their monthly bills drop. Not so for satellite TV viewers, who previously were not taxed at all. As such, their representatives in the Virginia House and Senate opposed the measure.
If enacted, the new law would replace a patchwork of local wireless and telecom taxes. The state would collect the new levy and distribute proceeds to cities and towns based on a formula crafted by Virginia municipal and county officials.
The wireless industry, which is battling what it considers discriminatory and duplicative taxes in cities and states across the country, supports the Virginia communications tax plan and would like to see other states do the same. Illinois is one such state headed in that direction.
The Virginia communications flat-tax bill was engineered by Delegate Samuel Nixon Jr. (R ).
“HB568 is a significant legislative milestone that achieves the most comprehensive reform of communication taxes ever approved by a state legislature,” said Nixon. “This measure represents true reform-reform that lowers communication tax rates, broadly applies the taxes, simplifies bills for consumers and provides competitive neutrality among vendors and technologies. No longer will Virginia’s tax policy essentially pick winners and losers in the communications industry. It is my sincere hope that this approach will be embraced by other states in the future.”
Last year, a similar bill backed by Nixon and Sen. Jay O’Brien died in a Senate committee. This year was different. The House and Senate passed the Nixon bill by comfortable margins.
What happens next to the communications flat-tax bill is up to Kaine.
“We have not declared our intentions on it yet. I think the governor wants to study the political implications first,” said Kevin Hall, a spokesman for Kaine.
Kaine could sign, veto or even amend the bill.
Kaine’s Democratic predecessor, Mark Warner, a wireless industry veteran and high-tech entrepreneur, supported an across-the-board, technology-neutral tax on telecom and communications services.
“We think it’s appropriate because it taxes at the service level, regardless of the type of delivery. It’s technology agnostic,” said Earl Bishop, executive vice president of the Virginia Telecommunications Industry Association.
“Wireless costs have dropped nearly 80 percent over the last 10 years, but the typical wireless consumer now faces over 17 percent in taxes on their wireless service, more than twice the average tax rate for other goods and services,” said MyWireless.org, an advocacy arm of cell-phone trade group CTIA. “Unfortunately, the wireless tax man is picking up steam. Between January 2003 and April 2004, the tax rate on wireless services increased at nine times the rate of other goods and services. In some areas, the wireless tax rates top `sin taxes’ on things like tobacco and alcohol. And some legislators want to tax wireless even more!”
