“The State Video Tax Fairness Act” was introduced in Congress with underlying goals which are laudable—ending discriminatory tax treatment, creating a competitive level playing field for all video providers, and increasing consumer benefit.
In fact, our friends who support the legislation are exactly right when they argue that consumers should not be taxed differently for video service merely based on how it is provided—whether by satellite, cable, fiber optic wire or wirelessly. Discriminatory tax treatment for the same product leads to market distortions and deprives consumers of the best service at the best price.
But to do so, the Act would strip states of their right to enact revenue policies according the will of the states’ elected representatives. Federal preemption of the states’ right to enact their own tax policies strikes us as a gross violation of our Federalist system of government.
Moreover, the effort to equate right-of-way fees with taxes is wrong-headed. Presumably, right-of-way fees are imposed to compensate for damage done to infrastructure or to cover costs of maintenance. To the extent right-of-way payments are in excess of what is necessary, they are wrong. So raising actual taxes on one provider to bring it into “tax parity” with another to cover a cost of doing business is also wrong.
The overarching issue is whether the federal government should have the power to reach into the states to dictate what taxes may be levied. While the 1996 Telecommunications Act exempted satellite video providers from paying local taxes, furthering the violation of states’ rights to now tell the states what they can and cannot tax would be a further insult to federalism.
Taxes on similar products should be similar, but that decision should be made at the local and state levels. Further, different parts of the same industry should not be taxed or regulated differently—they should be taxed or regulated at the lowest level to promote a competitive level playing field.
Federal efforts to interfere with the revenue authority of the individual states are illegitimate, no matter how laudable the goal.