City Council to discuss proposal for tax on cellular phone service

Pugh's bill aims to raise revenue as Baltimore faces deficit, layoffs

Industry calls levies `unfair'

March 22, 2004|By Laura Vozzella | Laura Vozzella,SUN STAFF

Cell phone service would be taxed under a bill to be submitted to the City Council today.

The proposal comes at a time when the city is facing a $21 million deficit in its current budget and anticipates having to reduce services, increase fees and cut more than 500 jobs in the next fiscal year.

The administration of Mayor Martin O'Malley is working on a set of revenue measures, but they are not expected to be ready for introduction at today's meeting.

The cell phone tax bill is being proposed by Councilwoman Catherine E. Pugh, a West Baltimore Democrat.

"I just know the city needs to look at some other revenue streams," Pugh said. "We have problems with the school system, and we're talking about laying off 500 people. I think we need to be in a mode of [financial] recovery."

The bill does not specify a tax rate, one of many details that will be fleshed out after hearings before the council's Taxation Committee, Pugh said.

The proposal was not welcomed by the telecommunications industry, which has fought local jurisdictions across the country in recent years as they have sought to tax wireless services.

Similar laws

In Maryland, Montgomery and Prince George's counties levy similar taxes, said Cary B. Hinton, regional director for state and local government affairs for Sprint. Montgomery County imposes a flat $2 monthly fee while Prince George's imposes a 5 percent tax on each cell phone bill, he said.

A bill to give Anne Arundel County authority to impose a cell phone tax stalled in committee during this session of the General Assembly. City officials said it was not immediately clear if Baltimore has the taxing authority to add a levy to cell phone service, or if it would have to seek that authority from the General Assembly.

Cell phone service, which is subject to state sales tax, federal excise taxes, and local and state 911 service fees, is taxed "more than any other type of goods in the state of Maryland," Hinton said.

"If our customers feel they are so heavily taxed, they will cut back on using [their cell phones]," Hinton said. "We think that's blatantly unfair."

Other bill failed

A similar bill failed in the City Council a few years ago, he noted.

But Pugh said the city has no choice but to look for new ways to raise money.

"I just think we're going to have to be looking at things like this," she said. "I would love to see that as a dedicated tax for public schools. I think we need to think about where do we go from here."

The city is facing a $21 million deficit in the current fiscal year, which concludes June 30. Three city departments - police, public works and transportation - expect to end the fiscal year millions of dollars in the red.

And last week, city finance officials presented a fiscal 2005 budget that calls for eliminating more than 500 municipal jobs, increasing a variety of fees and reducing fire protection and trash collection. That plan was unveiled the same day that the city agreed to lend Baltimore schools $42 million from its rainy day fund, leaving $14 million in reserve.

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