Court, Congress Move Against ‘TV Taxes’

Published March 1, 2008

In a victory for consumers and other advocates of equal tax treatment of telecommunications services, Franklin County, Ohio Judge Daniel Hogan has struck down a state tax levied on subscribers of satellite television.

Hogan found the tax unconstitutional because it applied only to satellite TV and thus gave an unfair advantage to cable companies and providers of other multichannel video services.

‘Illogical and Unconstitutional’

Officials with DIRECTV, Inc. and EchoStar Communications Corp., the nation’s leading satellite service providers, applauded the November decision.

“EchoStar and DIRECTV have long said that taxing satellite subscribers more than cable subscribers is illogical and unconstitutional, and that this discrimination is unfair because no group of consumers should be singled out for a heavier tax burden based solely on what technology they use, particularly when they are predominantly rural or price-sensitive,” the companies announced in a joint statement.

Ohio had been one of six states–the others are Florida, Kentucky, North Carolina, Tennessee, and Utah–to levy video service taxes on satellite TV significantly higher than those on cable.

Ohio’s satellite viewers forked over an estimated $26.2 million in extra taxes in 2005.

Congressional Response

A bipartisan group in Congress recently introduced legislation, the State Video Tax Fairness Act, to prohibit states from imposing discriminatory taxes on multichannel video programming products.

“Quality of service, variety, and cost to consumers should be the deciding factor in choosing a television service,” said Rep. Chris Cannon (R-UT), who co-sponsored the bill (H.R. 3679) with House Judiciary Committee Chairman John Conyers (D-MI) and Reps. Rick Boucher (D-VA) and Trent Franks (R-AZ).

“When the government favors one service over another using the tax code, consumers and taxpayers always lose. Instead of playing favorites, we should level the playing field and let businesses compete for subscribers,” Cannon continued.

Reps. Artur Davis (D-AL), Jim Jordan (D-OH) and Janice D. Schakowsky (D-IL) also endorsed the bill.

The Ohio Department of Taxation is appealing Hogan’s ruling, consuming more taxpayer dollars in the process.

Equally Bad Alternative

Noting states could decide to raise taxes on cable instead of lowering them on satellite systems, the National Taxpayers Union (NTU) is fighting to uphold the ruling against satellite taxes, keep additional taxes on any television service at bay, and support the State Video Tax Fairness Act.

“Much of the debate over tax discrimination in the video services community has improperly focused on a form of ‘fairness’ that only fills government’s coffers further–that is, making sure providers of similar services suffer the misery of equally harsh taxes,” NTU Government Affairs Director Kristina Rasmussen wrote in an open letter to Congress supporting H.R. 3679. “The ‘fairest’ fee or tax rate–for providers and taxpayers alike–is zero.”

Natasha Altamirano ([email protected]) is communications manager for the National Taxpayers Union, a nonpartisan citizen group working for lower taxes and smaller government at all levels.