The Barry administration asked the D.C. City Council yesterday to enact legislation that would result in the federal government and foreign embassies paying larger utility bills to override a benefit they now enjoy through exemption from payment of sales taxes.
If the measure is enacted, residential customers of the city's gas, electric and telephone companies would benefit from modest reductions in their home utility bills, a city tax official said.
The legislation proposed to the Council by Mayor Marion Barry would remove the 5 percent sales tax now collected from residential and business customers -- but not the U.S. and foreign governments -- on their utility bills.
In its place, the city would increase the tax it now collects on the gross receipts of the gas and electric companies from 6 percent to 9 percent and on the telephone company from 6 percent to 7.1 percent. The lower telephone rate would be imposed because taxes cover telephone calls out of the city as well as on local calls, while all the taxable business of the other companies is done entirely in the city.
Carolyn L. Smith, acting director of the D.C. Finance and Revenue Department, testified at a hearing that private customers who now pay the sales tax would get a slight reduction in their bills. She said the federal and D.C. governments, foreign embassies and other organizations now exempted from the sales tax would get an increase.
The utility sales tax exemptions now amount to sales of slightly more than $300 million a year. If the exempt customers could be taxed at the 5 percent sales tax rate the mayor now wants to drop, the city would receive $15 million a year in added revenue.
Edward Meyers, special assistant to Smith, estimated that if the bill were enacted, the gas and electric costs of residential customers would drop by 2 percent and those of telephone customers would drop by 3.9 percent.
For an average year-round city electric bill of $23 a month, as estimated by the Potomac Electric Power Company, the saving would by 46 cents.
Smith told the council's Finance and Revenue committee that the revamped tax proposal would not change the amount of money -- about $26.5 million -- the city collects each year in taxes on utilities, except that it would get a $3.5 million windfall the first year because of a change in collection schedules.
Barry wrote the council that he proposed the change to make the city's tax program more equitable. The city's Tax Revision Commision in 1977 recommended a similar change, but called for an increase in the rate of the gross receipts tax to 11 percent, bringing in $12 million more revenue.
Winesses representing the utility companies did not oppose the bill. But David Oliver, assistant comptroller of Pepco, noted that his company would have to petition for a rate increase to cover the cost of the higher gross receipts tax.
Brian Lederer, People's Counsel of the D.C. Public Service Commission, said no rate increase would be needed if he gross receipts tax were imposed like the sales tax as a separate item on each customer's utility bill.