Come 2024, people living in the unincorporated areas of Volusia County will have one fewer levy to pay.
In a special meeting Aug. 30, the County Council voted to eliminate the local tax on telephone, cable and satellite-TV services in the noncity portions of the county. The tax ends Dec. 31. The council’s action does not apply to cities in Volusia County, which have their own local communications taxes.
“I think it’s going to be a great day for Volusia County,” Council Member David Santiago said, adding he has long opposed the tax. “This CST tax has been a target of mine since I was in the Legislature. I’ve never been a fan of it. It’s just been a way for local governments to tax people in other ways that are not transparent.”
The county’s 5.22-percent tax on communications bills generates approximately $3 million per year for the county’s Municipal Service District. About 115,000 people live in unincorporated Volusia County and are thus subject to the tax.
That $3 million in revenue, county Budget Director Aaron Van Kleeck said, is equivalent to 0.2845 mills, or about 28.5 cents on the MSD’s tentative property-tax rate of 1.6956 mills, or approximately $1.70 per thousand dollars of taxable value.
By abolishing the teletax, he added, the county’s MSD millage rate may have to remain level for the 2024-25 fiscal year, rather than being rolled back or reduced.
“It will most likely require a flat millage rate next year,” Van Kleeck told the council.
The $3 million loss of revenue may even require cash from a higher ad valorem tax, Van Kleeck cautioned.
Yet, the county’s MSD fund has $38.4 million in reserves, and council members noted any imminent shortfall in the MSD budget could be offset by tapping the reserves. The reserves are a savings account, a cash cushion for unplanned or unforeseen expenses. Those reserves are part of the total MSD budget, which totals almost $79 million. That means the reserves, which may be carried forward from one fiscal year to the next, amount to almost half of the MSD’s 2024-25 budget.
Those reserves, Van Kleeck added, are “one-time money.”
“We’re going to draw down those reserves,” he said.
Tax fairness was an issue for at least one elected official.
“Taxes are a necessary part of our society,” Council Member Don Dempsey said. “This is a flat tax, which I’ve always been a proponent of. … If you’re going to use the communications system, you should pay a tax on it.”
While saying he would like to reduce taxes, Dempsey expressed concerns about repealing one tax and raising another tax, such as the property tax. He also raised the prospect of possible new costs coming to the county government next year.
“We don’t even know what the budget’s going to be next year. We’ve got SunRail. We’ve got inflation,” he said.
The capital cost of the extension of SunRail service from DeBary to DeLand will cost the county more than $11 million over time, as mandated by the Florida Department of Transportation and the 2007 commuter-rail agreements.
On top of the costs for laying another set of train tracks for the 12 miles between DeBary and DeLand, the FDOT may transfer ownership of the regional rail system to the local funding partners. Those local partners — Volusia, Seminole, Orange and Osceola counties and the City of Orlando — will then become responsible for paying the operating costs of the system.
SunRail now has an annual operating deficit of approximately $40 million, and Volusia County will be required to cover a portion of that shortfall. The FDOT was supposed to operate SunRail for seven years beginning in 2014, and then hand off the system to the local partners in 2021. That latter date crept up on local officials, and a transition plan for the future ownership and control of SunRail was never presented.
The Central Florida Commuter Rail Commission, which consists of representatives of the five local governments destined to own SunRail, has hired a consultant to draft a transition plan. That plan may be finished later this year. The new possible ownership handoff date for SunRail may be the middle or latter part of 2024.
In any event, Dempsey argued for preserving the county’s communications tax.
“As much as I dislike a tax, let’s keep this tax,” he said.
The only member of the audience to speak on the communications tax was Keith Chester.
“You all need to determine what your core responsibilities are as a county government,” he said. “What do we need to do?”
“You need to do the hard work and start cutting waste,” Chester added. “Let’s quit wasting money.”
The tide on the council was clearly in support of repealing the tax.
“When we can give tax relief to Volusia County, I think it’s a great day,” Council Member Troy Kent said.
The County Council voted 6-1 for doing away with the communications tax. County Chair Jeff Brower joined Vice Chair Danny Robins and Council Members Santiago, Kent, Jake Johansson and Matt Reinhart on the prevailing side. Dempsey was the sole dissenter.
“The sunset provision is effective Dec. 31, so it won’t be levied Jan. 1,” Brower announced. “And the citizens get a little tax break.”
A tax on progress?
On. Off. On. On even more …
The idea of taxing telecommunications began at the federal level, and it began as a “war tax.”
The first tax on telephone service was levied in 1898 to raise revenue to pay for the Spanish-American War. The tax at that time was considered a “luxury tax,” because so few Americans — mostly the rich — owned telephones at the time. Alexander Graham Bell, after all, had obtained a patent for his phone in 1876, but technology did not spread as rapidly then as it does now.
The Congress repealed the communications tax in 1902. The telephone tax was revived in 1914, when World War I caused a shortage of revenues from international trade, including U.S. companies doing business in Europe. The tax was repealed again in 1924, but resurrected in 1932 because the Great Depression resulted in a decline of federal tax receipts.
The communications tax was added to the federal Internal Revenue Code in 1954. The federal levy then was 10 percent in local and long-distance calls. The excise tax dropped from 10 to 3 percent in 1966, but was soon raised again to generate dollars to pay for the Vietnam War.
The federal tax on telephone service was later reduced once again to 3 percent, its current level.