What if the state legislature were to decide that McDonald’s controlled too much of the fast food market and decided to eliminate this “injustice” by exempting Burger King customers from paying any sales tax?
Such favoritism would be outrageous, of course. Indeed, that hypothetical discrimination would be almost as wrongheaded as the actual unfair advantages Rep. Matt Knoedler, R-Lakewood, and Sen. Bob Hagedorn, D-Aurora, want to provide Voice over Internet Protocol (VoIP) users at the expense of citizens using existing land-line and wireless services.
Their bill, HB 1173, is scheduled for a hearing Wednesday in the House Finance Committee. It deserves to be buried there.
For openers, HB 1173 would cost city and county governments the revenue they now collect from VoIP customers – collected from rates identical to those imposed on land-line services. But the tax advantage proposed in HB 1173 would be so massive that the Colorado Legislative Council last year predicted it would help drive “nearly all” phone traffic to VoIP by 2008. Moving that service from existing taxable technologies to a tax-free niche would imperil the $83.2 million in state and local taxes now collected from land-line and wireless customers, according to Chip Taylor, legislative director of Colorado Counties Inc.
As the Colorado Municipal League’s Geoff Wilson says, “It may well be appropriate to address the overall level of taxation in the telecommunications industry. But we don’t think the government should be busy picking winners and losers in the free market in this fashion.
“Similar services should be treated similarly under the tax code,” Wilson says.
That’s precisely the case. If VoIP providers are inherently cheaper and more efficient than their existing competitors, they should be able to triumph on a “level playing field” while paying the same taxes their competitors do.
Some VoIP providers argue they are an “infant industry” that deserves a tax break to help it grow beyond the baby steps. But the field is already drawing giants like Qwest – the company pushing hardest for HB 1173 – as well as Vonage and Comcast. Nobody gave tax breaks to cellular phone service providers a few years ago when they first challenged the land-line services. They thrived anyway.
It’s one thing to lower rates evenly across an industry. It’s quite another to let some companies or technologies off scot-free while the competition pays its fair share. The government shouldn’t load the dice in the marketplace.
