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September 7, 2006

Dear Colleague:

I would like to draw your attention to the attached Reuters article explaining how U.S. state and local governments could lose $8 billion a year in revenue under the national cable franchise reform bill currently being considered by the Senate.

According to a study released yesterday by a coalition of local government organizations, the Senate bill would preempt and greatly impede local government's taxing authority, leading to billions of dollars in annual loses and forcing such government entities to either cut critical services or raise taxes. The full study could be found at http://www.nlc.org/content/Files/LocalGovtPerspective090606.pdf.

During House consideration of cable franchise reform legislation this June, I raised a point of order against provisions in the bill that would limit the fees that local governments can charge to companies that want to offer video services in a specific market. Based on a Congressional Budget Office (CBO) analysis, local governments could lose between $100 million and $350 million that they currently receive from video providers under the House passed bill, HR 5252. The provisions separately contained in House and Senate measures would impose unfunded mandates on states or localities, which were prohibited under the much-publicized Republican "Contract with America."

I hope you will keep in mind the burdens that might be imposed on state and local government as Congress considers cable franchise reform this year.

Sincerely,

Tammy Baldwin
Member of Congress

Telecom tax restrictions seen hurting local govts

Reuters
Wednesday, September 6, 2006; 5:28 PM

NEW YORK (Reuters) - U.S. state and local governments could lose $8 billion a year in revenue if Congress further restricts their ability to tax telecommunications services, the National League of Cities said on Wednesday.

Alex Ponder, a lobbyist with the National League of Cities, said the organization opposes two tax restrictions included in the Senate telecommunications reform bill.

The bill proposes a three-year moratorium on new state and local cell-phone taxes. It also bans state and local governments from charging Internet access taxes and eliminates the existing exemption for municipalities that currently collect this tax.

The National League of Cities in a statement expressed concern that these provisions "could represent the first step toward eliminating all telecom-specific state and local taxes" and lead to lost revenues.

Together with other local government organizations, the group conducted a study that showed that 81 percent of all cities with populations over 50,000 would see their tax revenues decline if they cannot tax telecoms.

This drop in revenue would lead to a reduction in services to local residents with potentially more than 150,000 public sector jobs on the line as well as higher taxes on other taxpayers, the organization said.

The study argues that the telecom industry pays essentially the same level of property taxes as, and in some cases lower corporate taxes than, other businesses.

This finding contradicts the 2004 industry-sponsored study that showed that telecommunication firms pay higher taxes than other general businesses.

Analysts have said passing a telecommunications bill this year could be difficult because of differences with the Senate as well as with the U.S. House of Representatives. Another complication is the short legislative session this year due to the November congressional elections.

© 2006 Reuters