I. Introduction
Chairman Crawford and Members of the Committee, my name is Joshua Culling. I am state government affairs manager for the National Taxpayers Union (NTU), the nation’s oldest taxpayer advocacy organization. We have 362,000 members across the country, including more than 7,700 right here in Indiana. I thank you for the opportunity today to offer testimony on HB 1278, which would impose a 5 percent surtax on satellite television providers.
NTU’s opposition to this bill is two-fold. First, it will worsen the economic hardship facing Indiana families by increasing the tax burden of approximately 800,000 satellite TV subscribers. Second, it allows state government to micromanage the marketplace by arbitrarily raising the price of one television service option.
While our members tend to view tax increases as generally unwise fiscal policy, this one-two punch is especially problematic.
II. Tax Increases in This Economic Climate
The global economic downturn has adversely impacted state budgets across the country. States faced a cumulative $145.9 billion budget deficit in FY 2010 . These shortfalls resulted from a combination of declining revenues and unsustainable spending growth during periods of economic prosperity.
Unfortunately, many states ignored their overspending problems for years and characterized their respective deficits as “revenue problems.” A total of 32 states chose to raise taxes in the first three quarters of 2009 in order to fill their budget gaps.
Although Indiana has enacted some tax increases over the past few years, under the Leadership of Governor Daniels state government has made major strides toward fiscal responsibility by making politically difficult but prudent reductions in spending. Unfortunately, HB 1278 breaks with this trend by imposing an unnecessary and painful tax increase on thousands of satellite television customers, many of whom live in rural areas with no access to cable. With the state unemployment rate rising and property values falling, Indiana families have enough financial concerns without worrying about discriminatory taxes based on their preferred source of television programming. To impose this new tax would be economically ill-advised and unfair.
III. State Government Picking Winners and Losers
The legislation before you clearly favors the cable television industry while discriminating against satellite providers. This is not the government’s role. The state should establish a level playing field for all competitors, letting customers choose winners and losers.
Government should not tax Nike shoes at a higher rate than Adidas, nor should it levy a surtax on compact discs but not on cassette tapes. It is the responsibility of competitors within a marketplace to deliver products consumers want to buy. Shoe companies compete on the basis of style and price, not whether the government determines one should be more expensive than the other. The same is true for television providers: cable and satellite offer different programming at different prices. HB 1278 would add an unnecessary and expensive variable.
Some argue that a surtax on satellite providers mirrors the franchise fees the cable industry must pay for the right to build infrastructure on public lands. This is deceptive, as these franchise fees are a cost of doing business for cable. They purchase exclusive and valuable franchise rights in order to operate in a certain geographic area.
Satellite companies have similar costs associated with their business. They have had to bid competitively for the right to use of the federally owned spectrum over which they transmit satellite signals. They also must build and maintain satellites and launch them into outer space – a significant cost not borne by cable.
The “dollar-for-dollar” contention that satellite providers (and ultimately their customers) must pay in taxes what cable providers pay for public rights of way is flawed. In addition to constituting an outright tax increase, the legislation unfairly punishes satellite consumers.
IV. Conclusion
Many taxpayers look to Indianapolis to shepherd the state through these difficult economic times. For the most part, the Legislature has succeeded in making sensible budget choices and staving off the tax-and-spend mentality. HB 1278 is a break from that method of governing.
The last thing Indianans need is a higher monthly tax bill, something this legislation would impose upon thousands. The television marketplace will be more competitive without government meddling and price-manipulation. On behalf of more than 7,700 Indiana members of NTU, I urge you to vote down this burdensome and unnecessary legislation, and continue your hard work for taxpayers in the Hoosier State.
Chairman Crawford, I appreciate the opportunity to address this Committee and am pleased to answer any questions you might have.