- The Washington Times - Wednesday, March 28, 2007

The difference between a “tax” and a “fee” could determine whether D.C. Mayor Adrian M. Fenty has kept a promise he made prior to taking office.

Mr. Fenty, a Democrat who pledged not to raise taxes as the District’s fifth mayor, last week submitted a fiscal 2008 budget proposal that increases a surcharge on telephone bills from 76 cents for most residents to $1.55. The charge is intended to help the District pay for operating its 911 emergency call center.

Although the mayor has balked at labeling the rate rise increase a tax increase, others haven’t split the semantic hairs so well.

“Legally it’s a tax because it has to be paid; it’s not optional,” said council member Phil Mendelson, at-large Democrat. “It is a $20 million revenue increase that people can’t get out of.”

Mr. Mendelson and council member Jack Evans, Ward 2 Democrat and chairman of the council’s Committee on Finance and Revenue, said in a letter sent to Mr. Fenty yesterday that the mayor had violated his pledge not to raise taxes through another aspect of his Budget Support Act.

Mr. Fenty hopes to repeal a calculated rate mechanism that the council members say has led to a steady decrease in residential tax rates in the District.

In its place, he has proposed a fixed residential tax rate of 86 cents per $100 of assessed value. The change would have a negligible effect on taxes at first but would result in a “time-release tax increase” as property assessments rise, the council members said.

The change “…will increase our residents’ taxes,” Mr. Evans and Mr. Mendelson wrote. “It violates the ‘no new taxes’ pledge. It must be reconsidered.”

Mr. Mendelson late yesterday said that Mr. Evans had withdrawn his name from the letter. Mr. Evans could not be reached for comment.

Mr. Fenty said the 86-cent rate was a 2 percent rate reduction and that he was “very glad to have been able to provide that financial relief for the residents of the District of Columbia.”

The 911 fee stems from a charge imposed by the D.C. government against phone companies, which relay the fee to their customers on monthly phone bills. The proposed increase would raise the annual amount most D.C. residents pay from $9.12 to $18.60.

Whether the 911 charge is a tax or a fee has been the subject of debate, and the defining lines between the two words have been blurred.

Maryann Young, a spokeswoman for D.C. Chief Financial Officer Natwar M. Gandhi, said there are differences between a tax and a fee, but they are not clear-cut.

“Technically, a tax is charged against an assessed rate. A fee is usually flat,” Ms. Young said. A tax “is collected on a sliding scale. … A fee is per customer, per time, per visit.”

“This is a fee,” she said.

Another argument against the tax label is that the federal government, which does not have to pay state and local taxes, pays the 911 charge.

“It’s something everyone with a phone line pays,” said William Singer, Mr. Fenty’s chief of budget execution.

In a 2002 letter from the U.S. General Accounting Office to the chief administrative officer of the House of Representatives, general counsel Anthony Gamboa argued that although the line between a tax and a fee is blurred, the District’s 911 charge is a tax and did not have to be paid by the federal government.

“The fact that the charge is called a ‘user fee’ rather than a tax is legally irrelevant if, as is true here, the charge is really a vendee tax imposed by the District of Columbia government on a class of residents — telephone users,” Mr. Gamboa wrote.

Mr. Mendelson said the D.C. law was clarified about four years ago and the federal government is, in fact, required to pay the 911 fee.

“The incidence of the tax was changed to fall on the telephone companies,” he said. “The fact of the matter is that everybody pays.”

Mr. Fenty’s office has defended the fee increase by pointing out that the District’s neighboring jurisdictions have much higher 911 rates than the proposed $1.55. Not so.

Fairfax County used to charge a 911 residential fee of $3, but the Virginia General Assembly enacted a measure effective this year that replaced local 911 fees on land lines with a uniform statewide fee of 75 cents.

The statewide fee for wireless lines already was set at 75 cents, said Joel Davison, a spokesman for the Virginia Department of Taxation, meaning that is the maximum amount a state resident can be charged for 911 fees on a single phone line.

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