The Tax Man Cometh

It’s interesting to note that some allegedly conservative members of the Georgia State House are championing a new proposed tax on phone lines, television subscriptions and perhaps internet streaming services. Having not read the proposed legislation, I’m neither for it or against it, yet its mere existence raises a number of questions, and a variety of viewpoints to consider.

The purpose of the proposed new tax, which would be approximately 5%, is to help pay for the costs of building broadband internet lines to serve people who live in rural areas and do not have access to high speed internet service. The estimated revenue from the new telecommunications tax is $200 million per year. It would be levied on phones, internet phones, and satellite television, all of which are not currently taxed.

The new tax would replace the existing franchise fees on communications services, and revenues would be split between state and local governments. That raises the question of revenue allocation in areas that already have high speed internet service. Will tax revenue be given to internet service providers who are not doing new construction?

Representative Jay Powell of Camilla, who is chairman of the House Ways and Means Committee, has stated that the tax base has to be broadened to apply to new technologies that didn’t exist when the state’s tax structure was created. Not surprisingly, cable companies are in favor of the tax, according to a lobbyist for the Georgia Cable Association.

Depending on your perspective, the proposed telecommunications is either good news or bad news. If you live in a rural area that does not have ground-based broadband service, your only option is satellite internet. While that’s not a bad option, like satellite television, it’s subject to interruption by the weather. Satellite internet is also somewhat more expensive than similar service from cable-based providers.

On the other hand, the proposed telecommunications tax can be viewed as both “robbing Peter to pay Paul” and government subsidizing private industry. The tax will be levied state wide, which means people living in urban and suburban areas will be paying a tax for which they receive no benefit, since they already have high speed internet service. People who are currently subjected to franchise taxes may experience a reduction in their overall telecommunication tax rate if the new tax is lower.

Another objection voiced by some opponents is that using taxes collected by the state to help defray the costs incurred by private companies is unfair, and sets a dangerous precedent. If internet service providers are given money to help them pay for construction of new lines, shouldn’t suppliers of gas and electricity be given the same consideration. As an example, heat for many homes in rural Georgia is provided by propane (which is stored in nearby tanks) because natural gas service is not available. That brings up the question of whether the next tax proposal will be to subsidize gas company construction costs with a heating tax?

Yet another question is the life span of the tax. Will it continue to be imposed after all of Georgia has broadband internet service?

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