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Recently, I wrote about a brewing disaster in the world of television called retransmission consent in a post called "Government screws up your TV." Basically, disputes between television content providers (e.g. ABC) and television service providers (e.g. DirecTV) that play out on a heavily-tilted playing field threaten to cause blackouts for consumers that are entirely avoidable if only we had a policy structure that made sense. Well, the issue is rearing its ugly head again as a dispute between DirecTV and Sunbeam Television has drawn the interest of Senator John Kerry (D-MA), a legislator who has long had his eye on a legislative "fix" to the problem that would empower bureaucrats and do little to solve the underlying problem. (I'm sure this has nothing to do with the fact that a prolonged blackout threatens to keep many Boston-area viewers from being able to watch their Patriots play in the upcoming Super Bowl)
In a phrase that I utter approximately once a month, Senator Jim DeMint (R-SC) to the rescue! In conjunction with Representative Steve Scalise (R-LA), he has introduced a great bill called the "Next Generation Television Marketplace Act." This bill takes exactly the kind of approach that I counseled in my post:
Since I'm sure Jim DeMint reads everything I write and immediately drafts legislation based on my wisdom, the bill he drafted looks pretty great at first glance. It would do a few major things: repeal "must carry" provisions that force service providers to carry content whether they want to or not, repeal retransmission consent and compulsory license provisions in order to truly level the playing field between the two negotiators, and repeal ownership limitations that serve little purpose for consumers. By contrast, the approach Kerry had been floating would have inserted the FCC into the middle of these negotiations, with all of the politics and delays that come with them.
Though I'm still perusing some of the details, this looks to be a very promising bill and I hope that members from all parts of the political spectrum can come together to support it.
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So President Obama's 2012 State of the Union is over now and everybody's analyzing the details of what he said (including our NTU Foundation, where researchers are working on figuring out exactly how much his proposals would cost for taxpayers). For someone who claims to be laser-focused on economic growth and job creation, we couldn't help but notice that he left a few things out that SHOULD have been in the speech. For example...
The Keystone XL pipeline
The President conveniently neglected to mention that his Administration just last week denied a permit to build the Keystone XL pipeline, a project to safely deliver Canadian energy resources to the American market. Construction of Keystone XL could have generated as many as 20,000 jobs while bringing much-needed energy to a hungry domestic market that has faced obstacle after obstacle from this Administration. We've been calling for its approval since last summer, but unfortunately for taxpayers and consumers, the President ignored those calls and put the kibosh on the project.
Unlocking valuable spectrum
Cost-free to taxpayers, beneficial in reducing our staggering deficit, and absolutely vital to the continued growth and innovation of technology and the internet. What no-brainer policy am I talking about? Competitive spectrum auctions. Did the President talk about it last night? Of course not! There have been rumblings from both sides of Capitol Hill and both sides of the aisle about spectrum for some time, but some Presidential leadership could work wonders in ushering a win-win policy to completion.
Allowing businesses to...you know, conduct their business
This one's sort of a personal pet-peeve, but of course the President failed to mention the meddling in which his Administration has engaged/will engage in private business operations. Things like the AT&T - T-Mobile merger (which NTU supported) that his Justice Department and FCC squashed last month. Or the ongoing FTC antitrust investigation into Google, a company which charges its users exactly $0 to access its search engine and other services. Or the ongoing process of the Express Scripts - Medco Health Solutions merger. Keeping the federal government out of the way, by and large, is the best way to foster economic growth, but this Administration has time and again shown a tendency towards populist intervention that is unhelpful to say the least.
An energy strategy not centered on subsidies
The President did talk about energy last night, and some of it was commendable. He talked about opening up some more areas under federal control to energy exploration, though I'll await further details before judging. But most of what he said focues on how we should be showering even MORE subsidies on energy technologies that are to the liking of Barack Obama (namely: solar, wind, anything vaguely "green" or "renewable"). And of course he did it while taking swipes at the "Big Evil Oil Companies" he so frequently derides. Funny side note: the biggest of the oil companies that are the focus on Obama's vitriol was just passed as the most valuable company in the U.S. by Apple. The wife of the late Steve Jobs sat beside the First Lady during the speech and got a specific shout-out (a positive one!). I guess he doesn't mind that they're "the 1%" of companies and that they're sitting on tens of billions in largely idle cash reserves, another practice he has criticized elsewhere.
Any serious discussion of bipartisan spending reductions
The President made some vague remarks about "working together" in a bipartisan fashion, along with some passing comments about reducing waste in the federal budget. But he didn't come anywhere close to making it a serious and substantive part of his speech. Too bad. We already worked with the liberal U.S. Public Interest Research Group to give him a $1 trillion head start on spending cuts that left and right could agree upon and stand ready to assist him. Let's just say I'm not eagerly awaiting his call.
What else should the President have covered if he were serious about economic growth and job creation?1 Comments | Post a Comment | Sign up for NTU Action Alerts
The Wall Street Journal has an interesting poll up on its site today regarding taxation of retail sales on the internet. The question seems relatively simple: Should states require online retailers to collect sales tax? The thought process for most people probably goes a little something like this..."If it's a sale, it should be subject to sales tax." That probably explains why a huge number of people voted for the (misleadingly-worded) answer "State sales taxes should apply always." Problem is, the "right" answer (from NTU's perspective) is "State sales tax only with physical presence." So please, for the love of all that is holy in proper tax policy (hah!), head over to the WSJ and cast a vote for taxes only with physical presence.
As intuitively appealing as the answer that state sales tax should always apply is, it ignores years of Supreme Court jurisprudence and small-business protections that only require businesses with a legitimate physical presence in a state to collect and remit that state's sales tax. In other words, Andrew Moylan Incorporated would be required to collect Virginia state sales tax because Andrew Moylan Incorporated is physically located in Virginia, but should AM Inc. also be required to collect sales tax for California, New York, Michigan, or any of the other states where it is NOT located? The Supreme Court says no, and rightly so, because that would impose enormous burdens on businesses to navigate more than 7,400 different sales tax jurisdictions across the country.
Keep in mind that, technically, every single sale that is made online is ALREADY subject to taxation. If the seller has a physical presence in the buyer's state, they'll collect and remit sales tax just like your local Target or Wal-Mart. If the seller does NOT have a physical presence, then the buyer is supposed to report the purchase and pay a "use tax" on it directly with the state government. Unfortunately, this use tax regime is a disaster. Most buyers have no clue they owe these taxes and very few actually pay them, so it's not as if there's no problem here at all.
But if proponents of burdensome tax-collection plans were serious about "fairness," they'd advocate a revenue-neutral system that respects our Constitution and preserves tax competition. As NTU noted in a recent news release, one step to explore would be requiring all firms to collect sales taxes only for the jurisdiction where they're based, rather than for multitudes of governments around the country. Another would be supporting Senate Resolution 309 from Senators Wyden (D-OR) and Ayotte (R-NH), which affirms Congress' intent not to give states "the authority to impose any new burdensome or unfair tax collecting requirements on small internet businesses."0 Comments | Post a Comment | Sign up for NTU Action Alerts
Net Neutrality: A Solution in Search of a Problem
A solution in search of a problem. That’s the best way to describe the Net Neutrality regulations that the Senate is currently debating in anticipation of a vote later today.
The Internet is not broken. Given the present state of our economy, it is one of the few sectors that could be described as such. In just the past decade the number of Internet users has soared from 513 million to more than 2.1 billion. It has not only fundamentally changed how individuals learn, communicate, and work, but has spawned an entire economic ecosystem, without which Google, Apple, Facebook, and thousands of other companies (and the jobs they created) would not exist.
Moreover, all of this growth and innovation has occurred in large part without government regulation. Indeed, it is not a stretch to say that the Internet is the definitive free-market success story of our generation. Sadly, that hasn’t stopped Washington from wanting to gets its hands on it. And unlike Midas (or Steve Jobs, if we’re sticking to the theme), everything the government touches does not turn to gold.
By way of background, Net Neutrality is the principle that Internet service providers should not block or slow-down consumer’s access to networks. The fear, as Sen. John Kerry (R-MA), explained on the Senate floor yesterday, is that “the people who control those access points [to the Internet] can start discriminating about who gets access at what speed . . . and begin to charge mo"re for [faster access].”
Except there is little evidence that would ever happen. What supporters of Net Neutrality seem to forget is that consumers tend to not like getting shoddy, slow, or overpriced service.
That’s one of the reasons internet service providers have been falling all over themselves to invest in the needed infrastructure. Consider the recent battle between Verizon Wireless and AT&T – each of which have spent millions of dollars in an ad war about the relative strength of their mobile “3G” networks. Consumers are increasingly savvy about these sorts of things and the free market has worked to keep them not only honest, but pushing for improvement. That’s one of the reasons that 93 percent of broadband subscribers are happy with their service – more than 10 times higher than the 9 percent approval rating Americans give Congress.
But while Net Neutrality proponents rest their claims on unfounded predictions of some future harm, the threat of the FCC’s proposed regulations are very real.
Implementing Net Neutrality regulations would require the FCC to have deep access to the business practices of the regulated internet service providers. This would include the ability to constantly monitor and draw data from network structures, content types, delivery modes and speed, applications, user preferences, and usage activity. This is not merely a privacy concern. It would equip the FCC with a vast body of information that could enable the implementation of a long-sought Internet taxation scheme. And with Democrats constantly on the search for more revenues to fund their spending habits, the temptation for Internet tax schemes grows.
In searching for a solution to a phantom problem, the federal government threatens to create a very real one – stifling investment in our most promising source of economic growth. There is no market failure here that requires the government to regulate. Rather, the Internet is a free market success story that, if Net Neutrality regulations proceed, could end up with a very sad ending.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Durbin to Introduce Internet Sales Tax Bill
This just in: According to CNet News.com, Illinois Senator Dick Dubrin plans to introduce a bill that would require busineses to collect and remit sales tax on remote sales. Wyoming Senator Mike Enzi is expected to co-sponsor the legislation.
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Fairness Doctrine Prohibition Bill Highlighted in Latest Taxpayer’s Tab
As budget battles loom and entitlement liabilities grow, NTU Foundation is hot on the heels of federal spending proposals. This week’s Taxpayer’s Tab brings you four newly scored bills for your consideration.
One bill making ripples in the political waters is the Cut Federal Spending Act of 2011, sponsored by Senator Rand Paul. To address the projected $1.5 trillion deficit for 2011, Paul proposes cuts across many government departments and agencies -- even defunding the Department of Housing and Urban Development, nine agencies, and seven independent agencies. How much will it save taxpayers? Check out the article in its entirety here.
The latest Taxpayer’s Tab includes the following bills:
Do you or anyone you know live in Congressmen Joe Baca (CA-43), Dennis Kucinich (OH-10), or Mike Pence’s (IN-6) district or Senator Rand Paul’s (KY) state? Each of these legislators was mentioned in this week’s Tab. Read up on their proposals and keep a tab on them!
As a bonus, we also highlight a recently posted article by NTUF’s Senior Policy Analyst Demian Brady. The War on Federal Redundancy, featured in The Ripon Forum, addresses why Congress should target duplicative government programs first but quickly and assertively move onto the three 500 pound gorillas, also known as Social Security, Medicare, and Medicaid. Check out the whole article here.1 Comments | Post a Comment | Sign up for NTU Action Alerts
Will South Dakota stop traffic pumping?
There is an old adage that says nothing in life is free. You know those advertisements you see for free internation calls and pornographic chat lines? There’s actually a huge cost for those services. Unfortunately, millions of wireless subscribers like you help to pay for them through higher bills because of a practice known as access stimulation or “traffic pumping.”
Traffic pumping is the practice of artificially moving traffic onto a local exchange carrier (LEC). Traffic pumping takes place when an LEC enters into an arrangement with a calling company to carry “free services” over the LEC’s network. But because federal law requires that wireless and long-distance carriers reimburse LECs for calls on the network, the LECs take advantage of the increase in traffic and assess high fees on the wireless and long distance carriers. Consumers are ultimately the ones who must pay these fees through higher telephone bills. What’s more, the LEC pays the calling company a kickback for the increased traffic.
By one estimate, traffic pumping costs wireless consumers $190 million per year. The problem is now so serious that the Federal Communications Commission has called for efforts to address traffic pumping because it threatens to undermine the very basis of compensation for services in the telecommunications system. South Dakota appears to have heard the call for action, so much so that several senators have introduced Senate Bill 87. The bill would explicitly prohibit LECs from assessing charges certain “access stimulation” for traffic pumping. Unfortunately, the bill has become mired in a committee.
As we said in a letter to the Senate regarding SB 87, “regulations on both the telecommunications marketplace and the interaction among providers should be streamlined and kept to a sensible minimum. However, neither should those regulations create distortions that artificially impede upon the efficiency of the telecommunications sector nor impose higher prices on consumers.” SB 87 addresses these issues. Let’s hope that the Senate gets the message that this is not a narrow problem but a serious issue that needs action now.
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Wireless Taxes on the Rise
Most of us know that wireless phones are indispensible tools for businesses and individuals today. Unfortunately, it does not appear that most elected officials got the message to that effect.
A new report published in State Tax Notes shows that, after several years of relative stability, taxes and fees on wireless service are on the rise again. Wireless users now pay a combined federal, state, and local tax and fee burden of 16.3%, twice the rate of the average retail sales tax and the highest wireless rate in six years.
Nebraska, with a combined rate of 23.69%, continues to hold the dubious honor of “the nation’s highest wireless tax state,” followed by Washington (23%), New York (22.83%), Florida (21.62%), and Illinois (20.90%). The states with the lowest combined wireless tax rates are Oregon (6.86%), Nevada (7.13%), Idaho (7.25%), Montana (11.08%), and West Virginia (11.28%).
According to Scott Mackey, the economist who authored the report, most states have not increased wireless-specific rates, but rather have expanded sales taxes to more wireless services and goods. But at the same time, many local governments have aggressively imposed new and higher taxes and fees on wireless users. For example, the City of Baltimore and Montgomery County, both in Maryland, raised the per-line tax by 50 cents and $1.50, respectively, a burdensome cost for families who use multiple phone plans. Additionally, the City of Lincoln, Nebraska increased the business telecommunications license tax from 5.5 to 6 percent, which means that someone spending $48 per month on wireless service (the industry average) pays $11.35 just in taxes, fees, and surcharges before paying the cost of the service.
With states and cities in fiscal dire straits, there will be
a strong temptation to raise wireless taxes and fees. This is a shame because
as wireless taxes and fees increase, the cost of using those
goods and services also increases, which could slow economic activity.
Fortunately, as wireless consumers learn more about the tax burdens they must
pay, they have become more outspoken against higher burdens to pay for reckless
spending by government. Hopefully, this new report will encourage more
consumers to speak out and elected officials will finally get the message.
Tune into NTU's State of the Union Coverage tonight
Tonight at 9 p.m. EST, the National Taxpayers Union's crack government affairs and policy analysis teams will provide special online coverage of the President’s State of the Union Address, and we want you to be there and be a part of the discussion. We will be breaking down the President's proposals and what they will mean for taxpayers. Details on how you can join the conversation are below.
We look forward to seeing you online tonight at 9 p.m. EST!
We look forward to seeing you online tonight at 9 p.m. EST!
Illinois digs a deeper revenue hole with affiliates tax
Earlier today, with breathtaking speed, the Illinois State Legislature approved a measure that will tax online shopping by requiring the in-state affiliates of out-of-state online retailers to collect sales and use tax. The measure is now before Governor Pat Quinn for his signature or veto. If you are opposed to taxing online shopping and you live in Illinois, click here to share your concerns with the Governor.
What surprises me most about the outcome today is that so many politicians ignored reality and basic facts in voting to adopt this measure. The states that have attempted to tax out-of-state online retailers through their affiliates have not raised much, if any, revenue. What these "Amazon tax" schemes have done is invited court challenges, so I hope Illinois has some good laywers ready. North Carolina isn't tracking revenues collected and Rhode Island reports that it actually lost revenue because of an affiliates tax. The reason why is simple: the retailers have shut down their affiliates programs rather than be subject to this ill-conceived, unconstitutional tax. They still make sales, but the states don't get any revenue. But the states actually lose revenue because, without the affiliates, there are no businesses to pay income tax, sales tax, and other taxes they are required to pay. By one account, Illinois has 9,000 affiliates, who earned $116 million and paid $18 million in state income tax in 2009. But now that is likely going to stop flowing into the Illinois Treasury because reailers, like Overstock.com and Amazon.com have told their affiliates they will terminate their relationships because of this bill. There may still be a chance to stop this bad bill, but only if good people like you who are concerned about Illinois speak out; click here to contact Governor Quinn and tell him taxing online shopping is a bad idea.
What surprises me most about the outcome today is that so many politicians ignored reality and basic facts in voting to adopt this measure. The states that have attempted to tax out-of-state online retailers through their affiliates have not raised much, if any, revenue. What these "Amazon tax" schemes have done is invited court challenges, so I hope Illinois has some good laywers ready. North Carolina isn't tracking revenues collected and Rhode Island reports that it actually lost revenue because of an affiliates tax. The reason why is simple: the retailers have shut down their affiliates programs rather than be subject to this ill-conceived, unconstitutional tax. They still make sales, but the states don't get any revenue. But the states actually lose revenue because, without the affiliates, there are no businesses to pay income tax, sales tax, and other taxes they are required to pay.
By one account, Illinois has 9,000 affiliates, who earned $116 million and paid $18 million in state income tax in 2009. But now that is likely going to stop flowing into the Illinois Treasury because reailers, like Overstock.com and Amazon.com have told their affiliates they will terminate their relationships because of this bill. There may still be a chance to stop this bad bill, but only if good people like you who are concerned about Illinois speak out; click here to contact Governor Quinn and tell him taxing online shopping is a bad idea.