America's independent, non-partisan advocate for overburdened taxpayers.


Promote Video Services Competition through Nondiscriminatory Tax Policy

September 13, 2007

Dear Member of Congress:

On behalf of the 362,000 members of the National Taxpayers Union (NTU), I write to alert you about the growing issue of discriminatory state tax policy targeting video services. Currently, six states (Florida, Kentucky, North Carolina, Ohio, Tennessee, and Utah) levy video service taxes on satellite television that are significantly higher than those levied on cable television. We are concerned that this clearly inappropriate policy, where the state (advertently or inadvertently) helps to pick marketplace winners and losers, is likely to grow.

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. Policymakers would do well to remember that the "fairest" fee or tax rate - for providers and taxpayers alike - is zero. Telecommunications of all varieties have been targets for disproportionate and punitive taxes since the Spanish-American War, slowing much of the progress and productivity that could have emerged to enrich our society sooner.

Failing the most far-sighted tax policy of a zero rate, at the very least state and local governments should not discriminate among products or services by disadvantaging one with heavier taxes. Yet, as I mentioned earlier, inflicting the same measure of pain on all entities is no solution to the question of "fairness." Rather, taxes should be eased across the board. That is why NTU has championed reforms that would lower the tax burdens on all participants in the video services market.

One of the original reasons NTU has supported the federal moratorium on Internet access taxes is because the ban prevents revenue-hungry officials from heaping inequitable burdens on technological breakthroughs in online services. Thus, state and local governments aren_t able to treat dial-up connections differently from the new forms of access that have been evolving and will continue to evolve. Our state and national leaders should consider such a policy approach in future deliberations over the realm of video services ? one in which taxpayers and consumers, not fatter governments, are the ultimate beneficiaries. If the House and Senate were to undertake such reforms, any roll call votes on the resulting proposals would be included in our annual Rating of Congress.


Pete Sepp

Vice President for Communications