Tax & Budget In the News

 

The state budget produced by the Massachusetts Legislature this spring will look markedly different from the one Gov. Deval L. Patrick sent them last month. However, lawmakers should be certain to retain a reform that would close a tax loophole that cuts deeply into the revenues of cities and towns across the state.

At issue is a 1920s-era tax break intended to spur the extension of telephone service. Service was extended to every remote corner of the state decades ago, but the enlightened incentive lingers on as an inequitable tax loophole.

The arcane tax rules for telecommunication equipment tell the story. Poles owned by electric companies are subject to property taxes, while most poles owned by telephone companies are exempt. Equipment of telecommunications companies organized as partnerships is taxed, but wires and broadband owned by entities incorporated as telephone companies are exempt.

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A system that taxes identical property differently depending on the owner’s corporate structure is inequitable on its face. The fact that no other state — including the most thinly populated — has such a telecom exemption underscores the absurdity of continuing the practice in Massachusetts. The fact that the burden of the state-mandated exemption falls not on the state but on cities and towns underscores its unfairness.

Closing the loophole would give municipal budgets a significant boost. In proposing the change last year, the Patrick administration estimated that repealing the loophole would mean $75 million to $80 million in additional revenue to cities and towns each year. Worcester would stand to receive $2 million or more in additional revenue if the loophole is repealed.

Meeting with the Telegram & Gazette editorial board last week, Mr. Patrick expressed hope that municipal officials and members of the Legislature and the public would rally behind telecom-loophole repeal.

Besides giving municipalities a much-needed infusion of revenue, repealing the exemption would create a more level playing field among telecommunication and utility companies.

State Rep. Vincent A. Pedone, D-Worcester, chairman of the House Municipal Affairs Committee, is a leading advocate on Beacon Hill of telecom-loophole repeal. We urge his colleagues in the Central Massachusetts Legislative Caucus to add their voices to his to close the archaic tax break once and for all.