No on Proposition H: Chula Vista Utility Users’ Tax Hike

BY ED HERRERA AND JILL GALVEZ

Only a year after voters overwhelmingly defeated a sales-tax hike, Chula Vista City Hall is proposing yet another tax increase.

According to City Hall, Proposition H proposes a simple update to protect the city’s telecommunications tax revenue stream. What the measure does is expand the scope of the tax, thereby increasing revenues. Many wireless subscribers will see a zero to 5 percent increase. The ballot language fails to indicate the possible increases in taxes. It states the opposite.

Proponents say Proposition H is necessary for the utility users tax language to be technology-neutral, allowing the “city to treat all consumers equally.” What this means is that City Hall would like to legally force the tax onto all carriers and therefore consumers under the proposed expanded scope. This also means it is a permanent tax – likely to serve as a slippery slope to affect just about every form of telecommunications as technology progresses.

Proponents say: “It’s OK, 90 to 95 percent of wireless subscribers already pay it.” However, because Proposition H intends to expand the tax to new forms of technology, to say that some Chula Vistans won’t notice a difference on their bill is utterly deceptive.

As for public services, Proposition H contains nothing but rhetoric when it comes to protecting services. Not one cent of this tax is required to go to police, fire or any core city service for that matter. Proposition H allows city politicians to spend this money any way they choose. Aside from budgeting for service and personnel expenses, the city has several obligations that it has legally bound itself to, including pension funding, debt servicing and pay raises.

City politicians, in their ballot argument, say: “It’s OK, Chula Vista’s fiscal health plan requires a balanced budget, adequate reserves and pension benefit reform.” Yet a look at the ballot language reveals no requirements for reform. What proponents are asking voters to do is to put the cart before the horse. Incidentally, they are finally admitting that they are requesting additional revenue before reform.

With an ailing local economy with foreclosures rampant, many families continue to struggle as victims of the recession continue to mount. Proposition H will take more than an extra toll on families. Recent studies illustrate how wireless taxes and fees are regressive in nature. In fact, court rulings have successfully nullified the federal excise tax (the ordinance that the city currently refers to) and has prompted HR 1521, The Cell Tax Fairness Act, which seeks to halt such discriminatory taxes collected at the local level.

If it were not bad enough that City Hall tried to increase the sales tax, it is determined to raise the telecommunications tax on businesses – vital to sales and operation. Unfortunately, Proposition H has unintended consequences that put our businesses, city and local economy at a competitive disadvantage. Any possibility of attracting new industries – specifically in telecommunications, banking, software development, movie studios or high-tech imaging – would be shattered. Small businesses heavily rely on telecommunications. They spend an average of $543 a month on telecommunications.

Local utility tax increases such as Proposition H paired with excessive state costs raise critical economic issues in a larger landscape. In a highly elastic market such as telecommunications, the addition of tax and fee burdens deals black eyes to not only the city, but also the state’s competitive position in the wireless industry. The West Coast is highly dependent on the telecommunications industry. California alone is headquarters to telecommunications giants such as Cisco and Qualcomm and is home to Silicon Valley.

Voters should not be fooled. If City Hall’s primary intention is to protect itself from legal challenges and protect future revenue, then it should have included the newly defined scope of the services while decreasing the tax rate so that the proposed language would be revenue-neutral. However, City Hall chose not to.

Proposition H is a dash for taxpayer cash and its casualties are more than the truth and economics.

For these reasons, the Chula Vista Civic Association, Chula Vista Taxpayers Association, San Diego County Taxpayers Association, Utility Consumers Action Network and others urge Chula Vista voters to vote No on Proposition H.

What the measure does is expand the scope of the tax, thereby increasing revenues. Many wireless subscribers will see a zero to 5 percent increase.

Herrera is CEO of the San Diego South Chamber of Commerce. Galvez is vice president of Fast Blue Communications. Further information about Proposition H is available at http://chulavistataxpayers.org

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