Tax VoIP Illegally, Get a Raise

Rich Tehrani : Communications and Technology Blog - Tehrani.com
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Tax VoIP Illegally, Get a Raise

It is a sad day when a city government decides it needs to come after a specific technology -- one that has truly helped and empowered its constituents, in order to generate more revenue.

The city of Los Angeles just passed a nine percent tax on VoIP calls. In California, the voters actually have to approve tax changes and in this case, Measure S was passed by two-thirds.

Consider this however... the measure was placed on the ballot so late that there was virtually no time for anyone to counter it and let consumers know what the downsides are.

In addition, the the measure was packaged with a promise of increased police protection. Who wouldn't vote for that? Most people would vote to tax religious institutions if it meant increased safety.

The worst part of this tax is that it conflicts with a federal moratorium on Internet taxes signed by President Bush. Some in fact are calling it illegal.

Even the timing of the tax is terrible... Specifically, many complain that the new VoIP tax was proposed barely two weeks after the Los Angeles City Council granted 20 to 25 percent pay raises for all city employees, making them the highest-paid city employees in California.

VoIP providers -- especially independents, are up against a flood of competition from cable companies, phone companies and wireless providers. These large companies already use their size and relationships to lobby hard against any competition that would be good for consumers.

Now it seems the city of Los Angeles is on their side.

It should be noted that smaller VoIP service providers are responsible for more innovation this past decade than all other telephony advancements in the last 30 or so years.

Rather than tax IP communications services, wouldn't it make more sense to give financial incentives to VoIP providers so they can keep innovating, allowing consumers and small businesses in a  slower economy do better?

Ethically speaking, how can you single out a single technology, which has done nothing but help people around the world and tell a population if you let us tax it, we will make you safer? The whole Measure stinks and very badly at that. This is the Limburger cheese of taxes and measures in fact.

It is worth noting that the intended consequences of this measure will no doubt be unintended. There is competition to paid VoIP and it is called free VoIP. The more you tax paid VoIP, the more incentive you give people to go to the free variety which is (currently) immune from such irrational changes in the tax code.

As this happens, the paid VoIP companies begin to close shop and guess what happens... Unemployment increases and guess who pays the unemployment costs? The taxpayers!

Taxes and our economy are not isolated from one another. Passing new taxes on burgeoning technologies which the federal government has promised to protect from such measures is a very bad idea.

I for one am deeply saddened by this news.

[Heartland Institute, TMCnet]


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