Cell Phone Tax
6:39 am
Thu May 24, 2012

How A Lobbyist And His iPad Helped Stop A Telephone Tax

It’s no secret that interest groups influence state lawmakers. But it’s not often clear how that actually happens. Much of the action occurs behind-the-scenes. So we’re going to give you a rare glimpse inside the influence game -- to see how lobbyists help shape public policies that affect our everyday lives. Olympia Correspondent Austin Jenkins reconstructs how a lobbyist and his iPad changed the course of a $1 billion piece of legislation.

In order to understand this story you need to know in Washington there’s no sales tax on your old fashioned home telephone line. It’s a tax exemption.

Last year, Sprint Wireless sued the state of Washington. It said that so many people have given up their landlines at home, that cell phones have become the new home phone. So Sprint argued its wireless phones should also qualify for the same tax break. And the judge agreed.

“That would have resulted in $1 billion less revenue for the state, which is substantial,” says State Representative Ross Hunter. He chairs the House Budget Committee.

Hunter had an idea for how to respond to the court ruling, and he says, “We introduced a bill to fix it.”

Hunter’s legislation would have drawn a bright line: the sales tax exemption only goes to traditional home phones. Not cell phones. And not internet based phone lines that come from your cable company.

The matter was so urgent, Representative Hunter held a public hearing on his bill on the first day of the Washington legislature’s special session last November. That sent the cable guys scrambling to respond.

Ron Main heads the trade association for Washington’s cable television companies. He testified that day that Hunter’s bill was a de facto tax hike.

“This will result in a new tax on residential telephone service for about 800,000 customers served by cable companies alone,” Main said.

Despite that warning, the House Budget Committee passed the phone tax bill that day. Lobbyist Ron Main called an emergency conference call with his cable TV clients to "let them know that evidently this is on a fast track and we might have to take more extraordinary measures.”

Extraordinary measures. Main and his clients quickly decided they would take their case directly to the 800,000 Washingtonians who get phone service through their cable company and try to get them to call their lawmakers. This is often referred to as “lighting up” the legislature.

“The goal is to get telephone calls into members’ offices," Main says. "The more the better, obviously.”

To generate the calls, Washington’s cable industry spent $50,000 to produce a series of TV ads about the telephone tax. When they were done, Ron Main loaded them onto his iPad. He showed them to just a couple of key lawmakers.

Main: “We wanted to make sure that people understood that we were ready to engage the general public on this in an effort to slow it down so that we could explain our case and hopefully persuade some people that there are better approaches to take to resolve this issue.”

Main declined to show me the ads. And House Budget Chair Ross Hunter says he personally never saw them. But he did see he was about to have a fight on his hands.

Main: “Once you figured out that there was going to be a big lobbying effort, the risk-reward trade-off at that point changed.”

Hunter’s struggle was that if he brought the telephone tax to the floor of the House, Ron Main and his cable company clients might be able to muster the votes to amend it.

“You've got to decide are you going to win, are you going to lose?" Hunter says. "How can you set this up in a way so that you’re less likely to lose? This is not a simple place to work.”

And so Hunter took his bill off the fast-track. And the TV ads never aired. Hunter is adamant that he was prepared to push ahead with his legislation -– despite the threat of a major lobbying effort.

But in December of last year, both sides got a reprieve. The Washington Department of Revenue settled with Sprint Wireless and, in February, the judge vacated that $1 billion decision. After that, the issue of the telephone tax mostly went away, but never entirely.

“All session long it was like this simmering pot,” says Betty Buckley. She heads the trade association for Washington telephone companies.

Now remember it was the cable guys who were worried back in November. In April, it was Buckley’s turn. In the final days of the legislative session she got a call from her lobbyist.

He told Buckley that the Senate had introduced a bill to repeal the entire tax exemption for home phones –- worth $40 million a year.

And that’s not all. A public hearing was scheduled for the following day. Buckley was driving in eastern Washington. But she immediately headed for Olympia.

The next day, Buckley told the Senate Ways and Means Committee that repealing this tax break would put traditional telephone companies at a competitive disadvantage.

“Our organization simply cannot support another tax on telephones without a more holistic look,” she said.

Buckley says an ad campaign was never in the cards. Instead, the phone companies relied on shoe leather lobbying to argue that the tax would fall disproportionately on rural and senior citizen customers.

House Republican leader Richard Debolt says he didn’t need a lobbyist to convince him.

“So you got Granny who’s lived on the family farm, she doesn’t have a cell phone, she doesn’t live in cell reception," he says. "She’s going to get taxed because of that and it doesn’t seem fair.”

It would have taken a two-thirds vote of the legislature to repeal the phone tax exemption. Without the support of House Republicans, the Senate dropped it.

But all sides agree the issue isn’t dead. As the cable guys would say, tune in again next year to find out what happens.

Copyright 2012 Northwest News Network