Greg's Corner

Is there a Netflix tax coming soon?

Since the start of the commercial internet there have been runors and urban legends about certain taxes. There was one that said that the US Postal Service was going to tax every email sent in order to make up for lost revenue. That turned out to be untrue. Then there were rumors that the goverment would be adding taxes to the internet itself, however the government passed the Internet Tax Freedom Act which prevented that. Now there is talk of a tax on Netflix. Is this another urban legend or false alarm? Maybe not.

With cable prices rising out of control many households are cutting the cord and using online streaming services like Netflix. The more that people start using Netflix rather than cable the more revenue that cable loses. Most cable companies have financial agreements with municipalities to make them the exclusive cable provider of that location. So in turn the more that people Use Netflix that’s money that’s being taken out of the pockets of city governments. At least one city is looking to make up that revenue and Netflix is their target.

The city of Pasadena, California, is considering taxing Netflix to make up budgetary shortfalls. The proposed tax would only be a dollar but that’s not really the point. This kind of tax requires a public vote which would more than likely defeat the tax. However, the city is saying that the public approved this tax back in 2008 when they voted for a utility tax.

If Pasadena were allowed to enact this tax it would set a dangerous precedent. Want to watch YouTube instead of TV? That could be a tax. Want to use an antenna to get free broadcast TV? That could be a tax too. Want to use our own site, Geebo? Well that could be a tax to make up revenue that’s being lost from local newspapers.

The whole cord cutting movement was born out of the fact that consumers have limited choice when it comes to cable providers. If municipalities were to allow multiple cable companies in their area to promote competition then maybe cable priced wouldn’t be so astronomical. Unfortunately cities are very unwilling to give up well established revenue streams without taxing something new that they probably don’t even begin to understand.