Chicago’s “Amusement” Tax is No Laughing Matter
Convenience has a new price for Chicago residents. Thanks to a fiat administrative declaration by Chicago’s Department of Finance, residents are now burdened with a new online “amusement services” tax. That means if your billing address is within city limits, you will be forced to pay a 9% tax for services like Netflix, Spotify, and Xbox Live.
The new policy is predicted to generate an extra $12 million in annual revenue for the city, and is seen by many as a feeble attempt to quench the city’s $430 million budget deficit, and the $530 million in increased payments to police and fire fighter pension funds for 2016.
Government bureaucracies operate under a “see what sticks” mindset, and have no qualms about throwing all types of new taxes on the Internet regardless of legal precedent and future effects. Chicago already has one of the highest sales tax rates in the country at 9.25%. Now, the tax collector can literally infiltrate the living room.
The meager money grab by the struggling city is not only bad for Chicago’s economy in both the short and long term, but could also set a dangerous precedent for tax discrimination. Consumers of online amusement services will pay taxes that would not be levied if they had chosen the physical marketplace equivalent. Using the Internet to rent a movie will get you the 9% tax, but buying the movie digitally will be taxed at 9.25%.
This leaves open a number of questions. For example, Chicagoans pay a cable television tax. Now if they rent or buy a digital movie from their cable provider, will they be hit with a 9% or 9.25% tax on the movie and then the cable tax on their total bill? That equals double and discriminatory taxation. Definitely a no-no under the Internet Tax Freedom Act.
In addition to the discrimination, the new amusement tax faces heavy criticism for violating other federal law, state law, and Supreme Court precedent. On the Federal level, the new tax is likely, not only a violation of the Internet Tax Freedom Act, but also the Commerce Clause, and of the first and second prongs of the Supreme Court’s Complete Auto test. On the State level, the Dept. of Finance rulings clash with Illinois’ home rule and uniformity requirements.
Congress could bring more clarity to state tax boundaries by passing the Digital Goods and Services Act. This legislation would ensure consumers are not punished by multiple taxes when purchasing a digital good or service, modernize Congress’s role in tax policy for interstate and international commerce to better suit the digital age, and clearly establish jurisdiction for the taxation of digital transactions.
Chicago’s “amusement services” tax is emblematic of the wider government agenda seeking to expand tax revenue by taking advantage of the Internet. The Internet holds the potential for a streamline of new revenue for all levels of government, and the fiasco in Chicago emphasizes the need to establish a federal framework through the Digital Goods and Services Act to combat the trend of government overreach.
Lindsey Graham Introduces Restoration of America’s Wire Act in Senate
WASHINGTON, D.C. – June 24, Sen. Lindsey Graham (R-S.C.) introduced the Restoration of America’s Wire Act (RAWA), S. 1668. The bill’s purpose is not to “restore” any legislation to its original intent, but for the fed to further encroach into state’s jurisdiction.
The following can be attributed to Grover Norquist, President of Americans for Tax Reform:
“State legislatures are more than capable of making their own decisions about gambling online in their states just like they have done with live casinos. They don’t need the federal government babysitting them. The Internet should be a freedom zone, and this is a piece of that pie.”
Precedent since the birth of the Republic has been to leave decisions about gambling in the hands of the states. The states should continue to make their own decisions about the regulation of intrastate online gambling, just as they have done with brick-and-mortar gambling for hundreds of years. It has served the country well for these matters to be settled at the state level.
There are strong opinions and business interests surrounding gambling in general, but, fundamentally, this is a question of the defense of the 10th Amendment of the U.S. Constitution.
More from Americans for Tax Reform
The Remote Transactions Parity Act Has It Wrong: Removing the Physical Presence Standard Can Only Lead to Taxation Without Representation
Grover Norquist, President of Americans for Tax Reform, recently testified before the House Subcommittee on the Regulatory Reform, Commercial and Law on the Judiciary on tax nexus. Unfortunately Mr. Chaffetz' bill does not maintain the physical nexus standard and sets a precedent of taxation without representation.
The following statements come from Mr. Norquist's testimony that relate to tax nexus issues:
One of the challenges we have in taxation is that politicians love to tax people who cannot vote against them. States can raise taxes on the people who live and work in that state. But to export that tax to other people to reduce the opposition to tax increases is problematic.
Exporting taxes violates the whole concept of taxation without representation, and undermines competition between the states.
The discussion that Chairman Goodlatte has put forward on hybrid origin I think is a very good start. Origin sourcing, which clarifies that physical presence in a state is the law that governs the tax code, is a very good discipline on potential abuses by state and local government.
Cities and states that have taxed their citizens and businesses so badly that they fled to other states are now looking for a way to throw a harpoon into those that have escaped and try to drag back tax dollars. That has to stop.
I've heard some conversations about states' rights. States don't have rights. People have rights. States exercise power. This power is often abused against the people in their own state. That is not a good thing, but we ought to limit that abuse to the people who live in the state.
To view the coalition letter ATR has signed in opposition to this Bill click here.
More from Americans for Tax Reform
Norquist Testifies on Tax Nexus, The Marketplace Fairness Act is Still Bad News
President of Americans for Tax Reform, Grover Norquist, testified before the House Committee on the Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law. Mr. Norquist expressed support for the Business Activity Tax Simplification Act, the Digital Goods and Services Tax Fairness Act, and the Mobile Workforce State Income tax Simplification Act. While these bills were the topic of the hearing, the discussion quickly turned to online sales tax. Mr. Norquist expressed that the marketplace Fairness Act or anything similar is still unacceptable. Any legislation regarding sales tax must maintain the origin principle of physical nexus.
More from Americans for Tax Reform
The Obama Administration's Internet Take Over
Chairman Wheeler’s recent speech at his alma matter, Ohio State University, did not tell the full story about the Federal Communications new Open Internet Order.
The Open Internet Order will increase costs, decrease investment, and increase regulatory uncertainty. Put simply you are going to see costs rise and choices diminish.
Chairman said that special interests in Washington would not sway his decisions, but Washington DC special interest did contribute a great deal to his transition away from light-touch 706 regulations and heavy-handed Title II regulation.
The Ford Foundation and Open Society Foundations (funded by billionaire George Soros) were huge funders of the pro-Internet- regulation organizations. In its Open Internet Order, the FCC cited Soros and Ford Foundation funded groups 206 times. This is clearly disproportionate to free-market proponents who were cited five times (four citations to TechFreedom and one to the Free State Foundation).
Its hard to say whether the FCC even considered other points of view. When the FCC asked for public comments on its proposal in May 2014, the proposal focused on Section 706 regulation, not Title II. This gives opposing views no ability to submit research and comments about Title II effects, when they believe the question is something completely different. As a result, many experts believe the FCC could have violated the administrative Procedures Act by failing to give adequate notice of the rules it adopted.
When Wheeler says “Open Internet,” that’s code for public utility regulation. The Chairman will try to tell you different, but broadband reclassification as a Title II telecommunications service by definition equals rate regulation. Plus, under the FCC’s general Internet conduct standard, the FCC explicitly invites consumer rate complaints, which upon receiving these complaints, the FCC welcomes the opportunity to engage in rate regulation to determine whether the rates charged are ‘just and reasonable’.
Chairman Wheeler would have you believe that Title II is some kind of Net Neutrality light-touch regulation. Title II is not Net Neutrality, which includes the basic principles of no blocking, non-discrimination of content, and transparency. It is Public Utility regulation established in the 1930s.
Wheeler positions our choices as Title II public utility style regulation, or “we can have the people who operate the networks making the rules for the Internet.” This is a false choice. The FCC had a choice to implement a basic set of rules using light-touch regulation under Section 706, or an onerous set of rules under a Title II framework. It chose the latter. The FCC’s original net neutrality rules were based on Section 706 authority – not Title II.
He says, “we can have an Open Internet and light-touch regulation that encourages innovation and consumer choice.” We can have that, but we won’t because the regulations the FCC has passed will discourage innovation. With its 1934 monopoly era rules and micromanagement practices, with many regulations yet to be determined, nothing about Title II is ‘light-touch’. It is heavy-handed and onerous regulation of one of the most dynamic and innovative inventions in history.
ObamaNet Assaulting the Free Market
Statement of American's for Tax Reform President, Grover Norquist, on the Federal Communications' Title II utility regulation for the Internet:
While it will take long enough to read the 84 pages of dissent, let alone the more than 300 page rule making from the Federal Communications Commission, it is clear that as Commissioner O'Rielly says, this prophylactic approach is definitely "guilt by imagination."
As we pour over this document we are sure to find a number of things where the public did not have the opportunity to provide comments. This is not the so called "net neutrality" of 2006 or even of 2014. This is not Title II as passed by Congress for rotary phones. We do not support either of these approaches, and have voiced our opposition in the FCC's open comment period. However, we have never had the opportunity to comment on the FCC's new definition of either of these concepts. That in itself is against the law.
Like its handmaidens Obamacare and Dodd-Frank, the true ugliness of this assault on the free-market will only become known as we plunge deeper and deeper into its stormy depths.
The FCC Opens the Door for Taxing the Internet
Federal Communications Commission Chairman Tom Wheeler’s claim that Title II reclassification will not raise the cost of Internet access for Americans is false.
Wheeler and his staff consistently dodge questions on whether Universal Service Fund and similar fees assessed at the state, local, and federal level will now be assessed on Internet access.
According to Grover Norquist, President, Americans for Tax Reform:
The FCC's proposal to classify broadband as a Title II service would make broadband subject to New Deal-era regulation, and U.S. taxpayers could see a 16.1 percent increase on their bills because the Universal Service "Fee" of 16.1 percent on phone lines could automatically apply to broadband.
Brian Fung of the Washington Post reported that, contrary to expectations, the draft rules will actually include parts of Title II that would allow the FCC to extract funds from Internet providers to be used as subsidies.
Gigi Sohn, the FCC Chairman’s special counsel for external affairs, acknowledged that questions remain as to where Universal Service fees will be applied.
These new levies, according to the Progressive Policy Institute (PPI), would (total $15 billion) correction: $11 billion annually. On average, consumers would pay an additional $67 for landline broadband, and $72 for mobile broadband each year, according to PPI’s calculations, with charges varying from state to state.
Chairman Wheeler’s version of Title II for broadband leaves the door open for taxes or fees related to Americans’ access to broadband infrastructure, it could also mean taxes and regulations on data usage, video chats, emails, and video streaming.
ATR Urges Congress to Reject Restoration of American's Wire Act
Today, Wednesday February 4th, Americans for Tax Reform sent a letter to Congressmen urging them to reject the Restoration of American’s Wire Act (RAWA) based on 10th Amendment concerns.
A summary of the letter is below, and a link to the full letter can be found here.
Strong differences of opinion exist about the appropriate level of regulation of online gambling, both among and between civil libertarians and law-and-order conservatives. Some believe a legal regulatory regime is the best way to protect consumers and children, while some believe that a ban is ideal.
Even though strong opinions and business interests exist on both sides of the appropriate level of regulation of online gambling, fundamentally this is a question of the defense of the 10th Amendment of the U.S. Constitution.
As you consider RAWA we hope you will reject federal intrusion into this issue, and instead allow the states to continue making their own decisions about the regulation of intrastate online gambling, just as they have done with brick-and-mortar gambling for hundreds of years.
More from Americans for Tax Reform
State and National Coalitions Support the Internet Tax Moratorium
Dozens of State and National organizations have come together asking the Senate to pass a clean and permanent extension of the Internet Tax Moratorium. For the sake of continued growth and innovation through the internet, we request that the Senate pass S. 1432, the Internet Tax Freedom Forever Act. This legislation will protect Americans from being financially barred from the opportunities and benefits offered by having reliable internet access.
The FCC continues attack on the ISP Freemarket
The increasing desire of the Federal Communications Commission to expand its authority through Net Neutrality rules could have catastrophic consequences for both the growth of American Internet Infrastructure and the average consumer. The FCC is considering enacting Net Neutrality policies that would significantly limit Internet Service Providers, ISPs, from being able to dynamically control allotted bandwidth for high traffic websites such as Netflix and Facebook.
The FCC has been under consistent pressure to regulate broadband internet by activists with outlandish ideas that the same companies that provide internet service are also destroying the industry. While the FCC has historically supported a free-market approach of governance for ISPs, recent changes in policy led to the failed attempt to impose Net Neutrality in 2010 and continued failures thereafter. The most recent attempt by the FCC uses provisions from the 1996 Communications Act to justify Net Neutrality, even though congress never intended the wording in the bill for that purpose.
Worst of all the FCC has been entertaining the, “Nuclear option,” of classifying ISPs as a Title II Utility, treating the Internet as a government-owned utility monopoly. If this policy were to be enacted, Internet development would come to a halt, and the effects on consumer internet services would be disastrous.
With this in mind, “We therefore respectfully call on Congress to assert its authority concerning the FCC’s role, and ask the FCC to await further action from Congress.”
Unfortunately, during the FCC's Thursday May 15th meeting, the decision to move forward with Net Neutrality rules passed along party lines by a 3-2 vote. This will create unneeded uncertainty in the market, restrict investment and innovation, and ultimately harm consumers.
Read more: http://www.atr.org/fcc-continues-attack-isp-freemarket#ixzz31p8anGas
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