Even yet still more on revenues …
A few weeks ago, Rep. Dan Bosley gamely commented on this site that closing the Verizon tax loophole would lead to higher bills for consumers, and cripple broadband rollout in rural communities. Let's address these two claims:
- Verizon can only raise its prices as much as the market — or government regulation — will allow. It does not follow that if a business's costs rise, prices necessarily rise.
As we know, Verizon pretty much has a monopoly on local service, particularly in areas where Vonage et al are not available. So maybe they can raise prices without fear of losing business. Shouldn't monopolies be heavily regulated in the prices they charge?
- How's that broadband rollout working out for us? Is that even happening? Even if so, should that be funded by a completely unrelated tax loophole? Is that the best way to do things? Is it really a legal understanding with the state? What's the enforcement mechanism for the state?
In other words, if we continue to grant them this archaic loophole, Are we getting our money's worth?
Please share widely!
…of supply and demand. You are absolutely right Charley, in a competitive market a firm can not charge whatever they want. Because of the internet we can not post our thoughts here, we have tons of choices of alternate providers. If the state wants to grant Verizon a subisidy fine…but why through property taxes paid by working families and seniors?
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p>I have alot of respect for Dan Bosley, but I think he is wrong on this one.
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p>Whack ’em! Raise Verizon’s taxes and Verizon will:
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p>i) raise rates (paid by working families and seniors) if they can
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p>ii) cut wages or employment if they can (wages of working families)
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p>iii) cut returns to sharesholders (56 million households own equities)
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p>iv) pluck some cash for the Verizon money tree in the basement.
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p>Which to choose? Alternatively, you could choose to not raise taxes.
And so the question is whether it’s some combination of the above — the money tree had better have poison thorns — or a tax increase, which has been happening and will continue to happen.
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p>Choices, we all got choices.
they’ve got monopoly profits
Absorb the taxes?
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p>Cut a check to the government to pay the tax, and get the money from . (customers, employees, shareholders)
from one of these guys
It likely can’t come from customers. In any given market, telephony either (a) isn’t competitive at all due to limitations on land lines, or (b) is ultra competitive due to usability of cell phones and/or VoIP. So, they probably can’t jerk around rates too easily. In the former case, monopoly prices won’t increase due to an infrastructure cost… it acts as a sunk cost and therefore won’t move the supply curve. In the latter case, again, it’s a sunk cost, and in a competitive market you can’t just raise your prices because your costs go up — your rates have to stay within those of your competitors or you lose customers and still bear all those sunk/fixed costs anyway. So — it won’t come from customers.
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p>As for employees — they’re already paying them as little as they can. It’s not as if they’re paying more than they have to. Whether or not their taxes on already-owned property change, the supply-demand curves for their employment relationships simply don’t change. You might argue that they’ll have to lay people off (and I think you’d be wrong), but even if they did… the total number of telephone usage customers is only going up, so those employees would likely be offset by hirings in other telecom companies [probably mobile companies, but whatever]. So — it won’t come from employees.
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p>What’s left? Shareholders. It’s true that a huge number of people own stock, either directly or more often through 401k, pension, or other retirement package. However, we certainly don’t own the same amount, and in fact the “investment class” owns a disproportionately high amount of those stocks [and all others]. Therefore, they’d provide a disproportionately high amount of the revenue. This, of course, includes investors from 49 other states and 200+ other countries. Frankly, I like the idea of (a) the rich paying more, and (b) the out-of-state/country pitching in. Sounds like a big win for the MA taxpayer, especially the one who has under a few hundred thousand dollars worth of stock in MaBell.
in most states where they operate, Verizon pays full property taxes, only we’re stupid enough to give these guys a tax break from the stone age and stick with it.
Incidentally, is Verizon’s landline basis regulated? I have to admit up front that I do not even know any more–it has been years since I tracked that.
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p>Anyway, under the classical regulatory model, Verizon would in fact be entitled to pass those taxes on to ratepayers, as legitimate costs of business. The only issues would be (a) how allocated and (b) whether Verizon had contested any assessments not required under the law.
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p>Of course, even a monopoly faces a downwardly sloping demand curve.
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p>Another issue might be whether Verizon’s rates are today correctly adjusted to reflect the absence of these taxes. Back in the 1970s electric utilities got away with collecting and keeping “phantom taxes” that they had lobbied away.
…while paying their Chief 21 Million in 2006, they had revenues of 88 Billion and Net Income of 6.2 Billion.
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p>But they need a property tax break.
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p>PS – Not meaningfully regulated…they just file tariffs.
Whatever is transpiring now rest assured the existing cell phone towers will be getting lower frequency antennas.
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p>You are going to get streaming ads over your cell phone.
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p>Let’s hope the depression will prevent people paying for all this crap.
First, cell phone penetration is higher than landline phone penetration at this point, meaning there are more cell phones than land phones. That’s the real problem for Verizon’s massive landline network; people are jumping off and becoming wireless-only and Verizon has gotten used to operating its landline operations based on a certain level of monopoly profit that doesn’t exist any more. Verizon’s looking for reasons to raise landline prices that would get through the DTC tariffing process and would use the Verizon tax loophole as an excuse.
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p>Second, even on the local landline front, there are plenty of options for local service in every part of the state. So, Verizon has a point in that there are plenty of competitors. But we as consumers also have the right to choose one of those competitors if Verizon raises their prices.
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p>As for broadband rollout? It’s pretty well documented that America has lost its broadband leadership world in the world. At this point, any part of the state (or country) that doesn’t have any broadband is closer to a Third World infrastructure than a First World infrastructure. So, Verizon hasn’t built that rural infrastructure and they’re too late to claim that they’ve been trying. Luckily, Verizon landline isn’t the only broadband game in town. Cable companies, mobile phone companies, and satellite are also potential options. I don’t mind giving tax benefits to companies that are working for the public good, but it’s hard to believe that Verizon is that company if they’ve left a third of the state without broadband as of 2008. I think that tax exemption should be tied to a genuine effort to bring all of Massachusetts into the late 20th century, since we’re theoretically supposed to be one of the tech centers of the world.