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Legislation could mean higher cell phone, cable bills
Proposal requires 3 percent of tax return to local governments
Bill Hall makes a cell phone call in downtown Gainesville recently. Cell phones costs could be affected by a new communications services tax. - photo by Tom Reed

A taxing change

This article is the second in our weeklong series outlining the coming tax changes.

Tuesday: The bill would eliminate the 4 percent state sales tax exemption for groceries, which are currently taxed at 3 percent by local governments.
Wednesday: In an effort to move away from income taxes, the overhaul would place the burden on consumer services by taxing things like haircuts, veterinary services and lawn care for the first time.
Thursday: The bill could eliminate income exemptions for senior citizens.
Friday: Gas would go up by 6 cents per gallon under the bill.
Saturday: Cigarette taxes would almost double, moving from 37 cents to 68 cents per pack.

Satellite subscribers, cell phone users and cable customers could see a jump in their bills if state lawmakers approve a proposal to change Georgia's tax code.

Leaders in the House introduced four similar 127-page pieces of legislation at the end of February and formed a special committee to tackle the overwhelming changes that would move Georgia from income-based taxes to consumption taxes.

The bill, based on recommendations released in January by the 10-member Special Council on Tax Reform and Fairness, would essentially raise sales taxes and shift the burden onto consumers.

One feature would place a new 7 percent tax on all communications services, with 4 percent going to the state and 3 percent back to local governments. It would earn the state between $190 million and $200 million in new revenue annually, according to bill supporters.

Increases would only add up to a few dollars per month, but the change likely won't be embraced by consumers.

"I'm all for the Fair Tax and consumption-based taxes, but I'm against further increased taxation," Gainesville resident Bill Hall said. "We already have so many taxes to pay."

Hall, who uses cell phone service, satellite and wireless Internet, could see the spike across several bills.

"We pay a lot, and we don't have any control over those taxes," he said.

Modeled on a system in place in North Carolina and Virginia, the new tax would replace the patchwork of taxes and franchise fees that communication providers now pay. For example, satellite TV doesn't pay franchise fees or sales tax, as other communications providers do.

"Taxes on the communications system started with the monopoly of BellSouth, and the world has changed while the tax system hasn't," said David Sjoquist, director of the Fiscal Research Center at Georgia State University and a member of the tax reform council. "A good deal of communications services were not taxed and others are taxed by local governments through the franchise fee."

The franchise fee remains from the days of monopolies, when cities would give exclusive rents to one company, he said.

"It's not related to the cost of doing business, and we didn't think that was an acceptable argument anymore," Sjoquist said. "The franchise fee isn't reflective of those costs, and we needed to broaden the base of what's being taxed in communications to make it uniform."

Backers of the bill, including satellite TV's major competitors, said the new tax would level the telecommunications playing field and make pricing more transparent. Satellite companies say the proposal tilts the playing field instead by favoring cable customers.

The proposal would require 3 percent of the tax to go back to local governments. Direct delivery back to local governments would require a constitutional amendment and approval from voters.

"Redirection of those local government funds and changing the franchise fees will need an amendment," said House Majority Leader Larry O'Neal, R-Bonaire, who co-sponsored the tax reform bill. "We're still trying to get our arms around the technicalities and construction of the bill. We need to figure out how to bring companies into the mix that formerly escaped where others have played a substantial part."

The Association County Commissioners of Georgia and the Georgia Municipal Association, groups that represent counties and cities across the state, are open to the changes but want to make sure the state carries through on delivering the fees. Cities and counties currently struggle to collect the correct amount of franchise fees.

"If the proposal would get money back to the local governments, I'd be for that," said Tony Carattini, who used wireless Internet to work on his laptop at Inman Perk Coffee on Friday. "Being open about these changes in the early stages is better than being caught by surprise on your bill in the end."

Carattini uses wireless services and cell phones to travel for business and work from home. Land-line service is the only communications technology that would see a decrease in taxes.

"I use faxing capabilities from a land line at home, though my wife uses wireless to fax," he said. "The decrease for land-line and increase in other services could even out the change in my bills."


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