Voters get upset when an existing tax is raised, but they really get upset when someone notifies them personally. Sometimes a property tax increase slips by because the mortgage company pays it out of escrow. A new wheel tax has ousted many a public official, because it’s new and it is highly visible. You will recall the tax revolt and subsequent recall referendum when Knox County passed a wheel tax.
The Legislature is poised to institute a tax increase on most state consumers and the worry they have is that the people taxed will likely get a letter in the mail telling them about it and who did it. When every cable subscriber in the state gets a letter from their cable provider telling them their bill is going up every month—thanks to their local legislator—they are not going to be pleased.
I’m sure most legislators can just explain to their constituents that it isn’t a tax—it’s a technical correction. Gov. Phil Bredesen has had “technical corrections” in most all his budgets. It is usually couched as closing a loophole in the tax law and it has added millions to state coffers over the last seven years. This year it’s a correction to the code that taxes satellite TV, but has a partial exemption for cable subscribers.
House Republicans have started to stir, and some of Bredesen’s Democrats may join them. It is, after all, an election year. Sure, the state budget is short and revenue and cuts are being sought. But a direct tax increase on consumers might not be the most politic thing to do.
The first $15 of your cable bill is tax exempt, and Bredesen proposes to tax the full amount. It comes out to just over $16 a year per subscriber.
The cable companies will tell you the reason they get the partial exemption to the tax is because they negotiated agreements to provide the service. They pay property tax to local governments on their equipment. They pay a fee “per pole” for running lines. They pay business taxes. They also provide community access channels that televise local government and public interest programming. The satellite companies don’t have poles or public access channels and do not pay franchise fees.
The Bredesen administration will tell you that they are concerned about a lawsuit filed by the satellite companies over the inequity, and that the increase in the tax on cable subscribers is the only way to resolve it. But the suit was filed in 2002 and has been dormant for years. In other states where it has come to trial, the satellite companies have lost.
Bredesen’s response to legislators objecting to “technical corrections” is to tell them to figure out a way to fill the budget gap without the revenue. Republican leaders are looking around to see what can be done. They are expected to announce a “no tax increase” platform. In a state budget of $28.4 billion, the additional $49 million is not a lot of money. A budget of $28.4 billion becomes a budget of $28.35 billion. It isn’t a lot of money, but it allows the Republicans to show a little independence and separation on the side of lower taxes.
So it’s a little bit of theater, but at least it is on the side of consumers. Last year the independence movement consisted of the Republican state Senate voting against a megasite industrial proposal in West Tennessee, which was a public relations disaster from which they had to retreat.
As to the disparity in satellite companies not having a discount on state sales tax, there is a solution that makes the lawsuit go away and restores equity. Give satellite companies the same discount. But the idea of cutting taxes instead of raising them doesn’t appear to have any traction during this tough budget year.
Bredesen has shrewdly earmarked most of the cable tax increase for education, so he can say a vote against the cable increase is a vote against education. But money is money, and some other funds might substitute.