- The Washington Times - Monday, June 27, 2005

Alexandria officials have approved adding a maximum $3-a-month tax on city residents’ cell phone bills beginning this fall.

The city joins a growing list of local jurisdictions and localities nationwide that are beginning to impose such a levy on their respective cell phone users.

So far locally, cell phone users in Baltimore, Montgomery and Prince George’s counties in Maryland, and Fairfax, Prince William and Loudoun counties in Virginia must pay up to $3 in taxes each month.

“That clearly is a burden to taxpayers, on top of all the other taxes” said James Parmelee, president of Virginia-based Republicans United for Tax Relief. “And make no mistake, the average real-estate tax bill is skyrocketing. So to take skyrocketing real-estate tax bills and add a cell phone tax on top of that is a situation screaming for tax relief.”

The new ordinance will impose a $3 tax on cell phone plans totaling $30 or more a month. Those who pay less than $30 a month will pay 10 percent of their plan costs.

The tax will take effect Sept. 1.

In Alexandria, cell phone users are being hit with the new tax so the city can make up for revenue “lost” as a result of a reduction in the real-estate tax rate, even though the increase in property values taxed will cover the declining revenue and then some, said Bruce Johnson, director of the City’s Office of Management and Budget.

“We still have an increase in total revenue — the total budget is going up 8.1 percent or about $34 million, even with the reduction,” Mr. Johnson said. The increase is “to cover expenses we believe [are] necessary for the city.”

City officials estimate that the new cell phone tax will bring in nearly $1.7 million in revenue each year. The new tax will be in addition to the federal excise tax and the Virginia Wireless Emergency 911 tax that already have been implemented. The Alexandria City Council approved the cell phone tax last month.

The need for a bigger city budget is driven primarily by education and public safety costs, and the need for about $16 million “that’s just the cost of continuing to do business as we have before,” Mr. Johnson said.

Alexandria’s budget for fiscal 2006 totals about$468 million. Last year’s budget was about $433 million.

Citizen tax-advocacy groups say operating costs are high because of money mismanagement.

“Whenever you look into these local budgets you can find things that can be done better,” Mr. Parmelee said. “I think the bottom line is local spending. Local governments are literally awash in cash, despite the decrease in property tax rate the assessments go up, so they cut the rate a little bit, then they sit back and collect more money. There is no excuse for some of these local officials. They have lots more money than they did before.”

City officials point to long-term tax-revenue diversification as the ultimate goal in dropping the property tax and picking up a cell phone tax. Last year, the city relied on property tax revenue for a little more than half of its budget, Mr. Johnson said.

Last year, officials approved a 4-cent reduction in the property tax, bringing the tax from $1.035 per $100 of assessed value to about 99 cents per $100. Last month, officials approved an 8-cent reduction, or about 91 cents per $100.

In 2003, the Virginia General Assembly approved legislation that allows localities to implement the cell phone tax if needed. Since then, 32 of the state’s jurisdictions have levied the tax.

The wireless industry is “not thrilled” by the cell phone taxes, said Joe Farren, a spokesman with CTIA-The Wireless Association, an industry trade group.

“The average total wireless tax burned is 17 percent now, and the average tax on other goods and services is 7 or 8 percent. We feel it’s not only excessive, but it’s discriminatory,” he said. “Unfortunately, policy-makers over the last couple of years view wireless as a way to raise revenue without leaving fingerprints.”

In Maryland, several wireless companies including Verizon Wireless and Cingular are suing Baltimore and Montgomery County, arguing that Maryland has no authority to levy the tax.

Verizon hopes to persuade Virginia lawmakers next year to approve legislation that would require all telecommunications services to be taxed the same way throughout the state.

Some state lawmakers said it’s too early to tell whether such a measure would pass.

“I’m inclined at this point to say that it would be a good thing to make these taxes more uniform, but I’m not anywhere near ready to comment,” said Delegate Mark D. Sickles, Fairfax County Democrat.

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