What is a Utility User Tax?
The utility user tax (UUT) is a tax levied on various utility bills by more than 150 cities and counties in California. I have not researched other states to determine whether or not they also tax utilities.
The tax rate and the specific utilities that are taxed varies from one jurisdiction to the other. The most commonly taxed utilities are: landline telephones, cell phones and prepaid month-to-month wireless, cable, water and trash hauling services, as well as natural gas and electricity bills.
The tax rates can range anywhere from 1% all the way up to 10%. Additionally, residential and commercial customers pay these rates. However, it is not uncommon for commercial customers to pay a different rate than residential users – with those rates generally being higher.
The amount of revenue and the proportion of each city’s general fund generated by these taxes will obviously vary.
You can view drop down list and tax rate information for each California jurisdiction that charges a UUT here.
In May of 2017, American Children First launched “Operation Defund Sanctuary Cities.” This campaign targets sanctuary cities like Cudahy and Huntington Park by seeking to repeal these UUTs using the local initiative process. In California, voters are able to bypass their legislative bodies at the state and local level and put laws on the ballot directly before the voters if they gather enough signatures.
Under Proposition 218, we are only required to gather signatures equaling 5% of the total votes cast in the last gubernatorial election whenever we want to place a tax repeal or reduction measure on the ballot.
Consequently, with as few as 62 signatures in Cudahy and 176 signatures in Huntington Park, we can target revenue sources that generate millions of dollars and account for more than 23% of the city’s budget.
With filing fees, the cost of publishing legal notices in the newspaper and other costs associated with creating and printing the petitions, it only costs us anywhere from $300 to $700 to get a measure qualified assuming you rely on an all-volunteer signature gathering effort.
Needless to say, investing up to $700 for the opportunity to repeal a $6 million utility tax is a fantastic risk:reward equation that causes the city council members in these sanctuary cities much heartburn.