There are those who argue that any tax on subscription video service fees is unfair, but in many states, satellite services are taxed at a higher rate than the cable services. As a result, Michigan representative John Conyers introduced H.R. 3679 — known as the State Video Tax Fairness Act – which is wending it way through Congress. It passed a major hurdle last week when the House Judiciary Committee unanimously approved the bill.

It’s not a surprise that the cable companies oppose the bill, saying that they have to pay franchise fees on top of the taxes paid on subscriptions. On the other hand, if it were the satellite companies who were being charged at a lower tax rate for subscriptions, I suspect the cable company probably would not object to the bill.

Even the National Taxpayers Union has weighed in on the issue in favor of the new law. The bill states the following:

No State shall impose a discriminatory tax on any means of providing multichannel video programming distribution services, including Internet protocol (or any successor protocol), direct broadcast satellite delivery, and cable television services. For purposes of this Act, the term ‘discriminatory tax’ means any form of direct or indirect tax that results in different net State charges being imposed on substantially equivalent multichannel video programming services based on the means by which those services are delivered.

It is worth noting that this law will also apply to the telecos including Verizon who also deliver video programming. (It does not apply to free over-the-air broadcasts, because there is no subscription fee charged for that service.) It seems to me that it’s only fair to level the playing field, and while this is just one more example of the erosion of cable’s original deal, I think it’s a good idea.

Posted by Alfred Poor, July 28, 2008 6:00 AM