Troy Edgar’s Big Fat Tax Increase

Troy Edgar volunteered to write the ballot statement in support of this new utility use tax.  From his actions and statements, it is clear that Edgar not only supports this tax increase, but is also one of the main driving forces behind it.

Unfortunately for residents, Edgar has started a public campaign to disseminate misinformation about his tax increase.  Here is what Edgar is up to.

Knowing that voters are not too fond of tax increases or politicians who raise taxes, Troy Edgar has labeled his big fat tax increase, a “reform.”  The city is going to reduce the existing tax on telephone land lines by 1% and then expand the new tax to apply to almost all forms of electronic communications.  This is not a new trick. In fact, Edgar is only copying other tax loving politicians that have executed the same tax increase.

For example the city of Vallejo used the same trick when they were trying to increase the utility use tax (see SF Gate story here).  When Vallejo tried this, Jon Coupal, President of the Howard Jarvis Taxpayers Association, called it a “massive tax increase.”  Does Troy Edgar think Jon Coupal was wrong in his assessment? Personally, I would trust the Howard Jarvis Taxpayer Association over Troy Edgar, who has raised taxes over a dozen times.

Edgar would also like the public to believe that this tax is revenue neutral, because the original tax is being reduced 1%.  This assertion is the farthest thing from the truth.  First, the city’s own staff report states that, “no one can actually predict the future revenue to be generated.”  Thus, when Edgar says this proposal is revenue neutral, he has no evidence to support this.

Additionally, the same staff report indicates that, at the very best, Edgar’s tax will only be revenue neutral for a very short period of time.  According to the staff report, the current tax is slowly being lost due to “market erosion”. As a result, there is no way that Edgar’s new tax can be revenue neutral in the long term.

To make matters worse, the current tax is probably not legal and would not stand a court challenge.  Edgar’s own statement in support of the tax states, “court cases have created the risk that the TUT (Telephone Utility Tax) laws of most cities, relating to telecommunications, could be challenged.”  If this scenario were to occur, the current tax would be zero and there would be no way for Edgar’s new tax to be revenue neutral.  Troy Edgar claims to be a conservative, but instead of being outraged that residents of Los Alamitos have been charged what could be an illegal tax since 1991, he goes on a crusade to expand the tax.

Using common sense would also conclude that Edgar’s new tax is not revenue neutral.  Currently, most people only pay this tax once, on their home telephone line.  However, if the new tax passes, most residents will pay the new tax multiple times.

Current residents that have landlines will still have to pay the tax on their phone bills.  In addition, if the tax passes they will have to pay tax on all the other services the tax will be expanded to cover.  Consequently, if you have a landline and a cell phone, you will pay the tax twice.  I would venture to guess that most residents of Los Alamitos that have a landline also have a cell phone.  In my case, I could be paying the tax four times.  I would pay the tax on my landline.  My wife and I have cell phones with separate bills which means we would have to pay the tax on both of these phones.

Also, the law is written so broadly that it could possibly include a tax on email service (if you are not using a free email service).  Besides my free Gmail account, in order to have a custom domain address, I also use an email service that charges me a monthly fee.  The new tax will apply to, among many other things, “services that enable the customer to store, send or receive recorded messages.”  Email definitely lets you “store, send or receive recorded messages”.  Therefore, I could pay the new tax a fourth time.  In the end, I would go from paying a 6% tax on a $25 phone bill, to paying a 5% tax on over $200 in phone bills.  This may be Troy Edgar’s definition of revenue neutral, but it definitely is not mine.

Most Los Alamitos residents will likely have an experience similar to mine.  Here are just some of the telecommunication services that will be taxed under the new tax: “central office and custom calling features (including but not limited to call waiting, call forwarding, caller identification and three-way calling), local number portability, text messaging, Ancillary Telecommunications Services; prepaid and postpaid services (Including but not limited to prepaid calling cards); mobile telecommunications service; Private Communications Service; paging service; and 800 service.”

If you were wondering why Jon Coupal called this a “massive tax increase” when Vallejo was pulling this stunt, now you know.

The next propaganda bullet point for supporters of the tax is that residents with only cell phones are not paying their fair share. In his support statement for the tax, sounding more like Barack Obama, Edgar makes the claim that the current tax leaves “some individuals and businesses not paying their fair share on new communications technology.”

Once again, Edgar’s veracity is more than questionable.   According to The Wireless Association, “the average rate of taxes and fees imposed on wireless consumers is more than 16.3 percent while the average rate of taxes imposed upon general goods and services is 7.4 percent.” In California, consumers already pay 15.72% tax on wireless services.  If Edgar’s 5% tax is added on top of the existing taxes, residents of Los Alamitos will be taxed over 20% for the right to own a cell phone.  I am not sure what Edgar’s definition of fair is, but paying 15.72% is enough.  Raising the cell phone tax over 20% is outrageous.

Finally, Edgar’s deceitful campaign for the tax increase tries to scare residents into supporting the new tax.  In his support statement, Edgar claims that this new tax will “ensure that we can continue to provide quality services vital to Los Alamitos including police, firefighters, street repaving, and quality of life programs.” However, Troy Edgar does not provide any statistics for how much of the annual $650,000 telephone tax revenues are currently used towards police and firefighters.  What we do know, is that the same night the council voted to put the new tax on the ballot, they also passed an agenda item on how to spend some of the money.

This agenda item gives us a great clue as to how Troy Edgar and crew are really spending the money.  The City Council decided to spend $358,000 of the telephone utility tax revenue to hold a contest.  The City Council came up with ten projects and let participants vote on which project would receive the money.

Here are the 10 projects

1. Develop a Community Garden
2. Digital Reader Board (Located outside City Hall)
3. Emergency Kits for Every Household
4. Expand Free Summer Parks Program (Add free field trips and water splash day)
5. Iconic City –Wide Signage
6. Light Pole Banners (Decorate City Light Poles for 5 Years)
7. Oak Gym (Donate Funds to refurbish oak gym)
8. Plant Trees
9. Seed Money for Sugar Beet Festival
10. Senior Trips Scholarship Program (Send high school seniors on trips)

Of the options listed, not one is to hire a new police officer or firefighter.  No Conservative should vote to provide funding for any of these options.  Troy Edgar claims to be a conservative, but wants to raise taxes in order to fund this tomfoolery.

I remember watching the Carly Fiorina commercial attacking Tom Campbell for being a demon sheep.  After all of Troy Edgar’s tax hike shenanigans, the demon sheep ad applies to him better than it does to Tom Campbell.  Troy Edgar is a tax wolf in sheep’s clothing.

Update:  Los Alamitos has published the PowerPoint presentation from June 25th here.  Here is some additional analysis.

From the PowerPoint, the TUT will “Reduce the tax rate to 5%” BUT “Expand the base by including VoIP (Voice over Internet Protocol, e.g. Skype, Magic Jack, Google Voice and commercial systems like Ring Central — note this traffic would be extremely difficult to measure as it’s intermingled within the Internet packet stream), broadband (the high speed connections to homes and businesses provided by cable companies, AT&T, etc.), paging and private communication lines (T-1).

We’ll bet that anyone in the Los Al office parks along Valley View or Katella with more than a few employees and some sort of computer network has at least “T-1” circuit service to their space that provides the bandwidth and speed to support VoIP, data and video services as would  be necessary in a modern business environment.  This is an ONEROUS tax and WOULD, in fact, “tax access to the internet” — what Edgar’s trying to get away with is defining no charge access as paying for connections to actual websites which, of course, is free once one gets to the site via a broadband circuit one must pay for.

The MOST devious aspect within this Presentation is that it’s being sold as a tax decrease.  There’s NO projection of the revenue increase it would achieve, which is precisely its intent.  We’d expect that to be substantial!