^{Democracy & Technology Blog} Virginia’s flat tax on communications

Mayors and city councils are the chief threat to affordable broadband, as my colleagues and I often remark. Many places, like my hometown of Portland, Oregon, for example, tax telecom because they don’t have to get taxpayer approval (they know they couldn’t get that). But unfortunately for the Portland City Council, Oregon has the initiative and the referendum. The City Council wanted to raise taxes on cellphones, but the industry signalled its intent to call for a referendum (a poll showed that 58% opposed the cellphone tax).
Telecom taxes and cable franchise fees are generally viewed only in terms of local government’s insatiable need for cash. As a result, these services are taxed nearly the same as alcohol and tobacco. A growing number of lawmakers are focusing on the fact that localities with higher taxes experience lower investment in broadband networks and increasingly force themselves into the corner of having to subsidize risky municipal networks. In Virginia, where the average phone bill is 30% taxes, the Legislature has taken a huge positive step in establishing a 5% flat tax on all communications (incl. video) services (see “Communications tax passes,” in the Richmond TimesDispatch). All competitors will be treated equally, and most taxpayers will see a reduction in what they have to pay for communications services. This is a farsighted move that will attract investment to the state and ensure that Virginia is one of the first and not (like Oregon, I fear) one of the last states to get real broadband.