Council Delays Action on Expanded Telephone Tax

One week after signaling that it would approve an expansion on the city’s 10% telephone tax to cover international calls, the Los Angeles City Council on Wednesday backed away from the levy and agreed to delay action until at least June 30.

In voting 11 to 2 for the delay, council members voiced displeasure about the regressive nature of the tax, conflicting information on the amount of revenue it would generate and the technical concerns voiced by long-distance telephone companies in assessing the 10% levy.

Only last week, the council had given a preliminary approval for the tax on a 10-3 vote. Despite lobbying by the phone industry and business groups in budget meetings last month, the council approved an expansion of the tax July 1 to include domestic interstate calls. The 10% tax already applies to intrastate long-distance calls.

Councilwoman Gloria Molina successfully lobbied for the delay after Chief Administrative Officer Keith Comrie told council members that the tax would generate an estimated $10.6 million in revenue. One week earlier, he had estimated that it would raise less than $2 million. Even so, Comrie said the tax should be expanded because some long-distance phone companies had technical bookkeeping difficulties in differentiating between domestic and international calls.

Molina said the council would be “totally irresponsible” in assessing the levy considering the discrepancies in the information.

Councilman Zev Yaroslavsky, chairman of the council’s Revenue and Finance Committee and chief proponent of the tax, suggested that the chief issue for Molina and Councilman Richard Alatorre, another opponent of the tax, was a desire to spare their constituents, many of whom are Latino immigrants, from having to pay more to call Mexico and Central America. Yaroslavsky argued that the tax was equitable. As it is, he says, “Call a relative in El Paso, you pay a tax. Call a relative in Juarez, you don’t pay the tax.”

Newly elected Councilman Nate Holden, attending only his second council meeting, suggested that all of the phone tax be reconsidered, saying it especially hurts the elderly who are living on fixed incomes.

Yaroslavsky pointed out, however, that under existing city law, the disabled, those 62 years of age or older, or those with gross incomes of less than $13,300 a year may apply for exemptions from all city utility taxes.