When your telephone, electric and gas bills go up this summer, don't blame Pepco, C&P Telephone or Washington Gas Light. The utilities are just doing the dirty work for the D.C. City Council.
Your home phone and electric bills will jump $1 a month, the gas bill will go up by twice that much and business utility charges will increase even more as a result of a new tax passed last spring.
When the council members voted to boost the gross-receipts tax on utilities, they didn't tell their constituents they were raising taxes $50 a year for every family in Washington.
No. This was a tax on utilities, a tax on three rich and not overly popular companies that could presumably pay a little more, so the common folk wouldn't have to.
Except that the utility gross-receipts tax amounts to a sales tax on electricity, natural gas and telephone calls. We all know who pays sales taxes and it's not the store.
In addition to the 6.7 percent gross-receipts tax, the city also collects its regular 6 percent sales tax on utility bills. That makes utilities--the essential services that few people can do without--one of the most highly taxed commodities in town.
Ironic, isn't it, that the D.C. Council, the home-rule government that claims to put the interest of Washington's ordinary people first, should choose to slap a 12.7 percent tax on the essentials of urban life.
One out of every eight dollars you pay in District utility bills goes straight to the D.C. government. Like all sales-based taxes, the utility tax is highly regressive. Though the rich may set their thermostats differently than the poor, the tax on utility bills gives little consideration to taxpayers' ability to pay. We all pay 12.7 percent. That rate contrasts with the maximum D.C. income tax rate of 11 percent, which is paid only by those with a taxable income of more than $25,000 a year.
The District's utility tax not only is a backdoor way to tax consumers, it is an ingenious method of taxing Washington's tax-exempt institutions like the federal government, Metro and nonprofit hospitals, colleges and museums. Those organizations don't pay sales taxes. But the utility companies pay the D.C. gross-receipts tax on all their sales, including the large fraction of their business that comes from tax-exempt institutions.
Ordinarily, I'd applaud the D.C. government for finding a way to tax the freeloaders who consume city services without paying, but this is just another example of how fouled up utility taxes are.
There is an extraordinary unwillingness in this town to face the reality of taxes. No official wants to stand up and vote to increase taxes for the people who elected them or to give a tax break to a special interest. But they find ways to do it.
The District Building bean counters learned their tax trickery by watching Capitol Hill, where the writing of convoluted tax laws is an artform more obscure than concocting plots for Russian novels.
Tucked into the utility tax bill is a provision that would do the Ways and Means Committee proud. In the interest of bringing tax collection schedules into line with the District's fiscal year, the council voted to change the timing of the utility tax collection. By speeding up collections, the city will pick up a windfall of $5 million to $6 million this year that will help nicely in balancing the District's budget.
While the District levies taxes on utilities that actually are paid by their customers, the federal government has created "phantom taxes" on utilities that are collected from consumers but not passed on to the Treasury.
As the Environmental Action Foundation pointed out last week, the nation's electric companies billed their customers for $5 billion in federal taxes in 1981, but actually paid the government only $1.3 billion.
The missing $3.7 billion represents taxes the utilities are able to defer because of tax credits, depreciation and the like. The utilities correctly contend that the money is paid to the government eventually and in the meantime is invested in power plants and lines that would have to be paid for by customers anyway.
The power companies argue that they get this interest-free loan from the customers and government because federal law requires it. They rarely mention that the electric utility industry lobbied hard for that law.
Each of these tax gimmicks makes people increasingly cynical about the tax system. A special interest here, a hidden tax there, a few little loopholes, they add up to a system riddled with inequities and lacking even a semblence of fairness.
The less people respect the rules, the more likely they are to ignore them. Tax avoidance, tax chiseling and outright defiance of the revenue collectors are going to grow until the Council in the District Building and the Congress on Capitol Hill create a tax system worthy of respect.