Commission Wraps Without Recommendations on Communications Taxation

The Maryland Communications Tax Reform Commission, which is required by law to submit a report by the end of this month to the General Assembly, held its last meeting on June 12 to finalize its actions.  Instead of voting on a proposal to reform communication taxes in Maryland, the group decided to submit a report with “findings” that would include the three proposals that were reviewed and discussed.  The Commission did not take a vote on any actions.

Charged with assessing the “feasibility and fiscal implications for the State and local governments of a modernized, competitively neutral communications tax and fee system,” following a presentation by the Comptroller’s Office at a previous meeting describing the revenue implications of the wireless industry proposals, discussion focused on proposing State reforms and deferring action at the local level. In response to these discussions, the wireless industry developed another proposal that would “create a statewide communications tax while leaving the local tax structure in place.” A description of this proposal is below.

Repeal the Public Service Company Franchise Tax levied on landline telecommunications services; reduce the tax rate on public utility telecommunications property to the rate of non-public utility property; exempt the purchase of communications network equipment from the State sales tax. Institute a new 4.0% State sales tax against all communications services, including reducing the sales tax rate on wireless service from 6.0% to 4.0%. Proposal indicates that additional State revenue will be used to replenish local property tax revenues and to establish funding for broadband development in rural areas.

Although the proposal would replenish the local revenue lost by lowering the tax rate on public utility property, MACo and MML representatives serving on the Commission expressed concern that there would be no guarantee that the funding would continue. Over the past few years local governments have come through a difficult time where millions of dollars in state aid to local governments has been reduced or costs have been shifted.  This proposal, although good intentioned, sets up another scenario where this type of action could occur.

Comcast Cable’s representative expressed concern that their customers would bear the brunt of the new taxes.  Under the proposal, a 4% sales tax would have been extended to cable television. Other members asked questions about the proposal’s effect on small business.

After some discussion, Senator Nancy King, Commission co-chair, commented that she didn’t think the group would come to consensus and suggested that they present all proposals in the final report as findings for the General Assembly to consider when deliberating future legislation. Concerns expressed by Commission members will be summarized in the final report.

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