Trade Group: Satellite Tax Unconstitutional
Mike and Peter are next-door neighbors. Both are rabid Red Sox fans and both subscribe to television providers for channels like NESN to ensure that they never miss a game.
For this privilege, the Commonwealth of Massachusetts will now slap Mike with a tax of 5 percent, but it will let Peter off without paying a penny of state tax on his TV bill. Why the difference? Because Mike chooses to subscribe to satellite TV, while Peter chooses cable. The state legislature slipped this provision into the budget quietly, and Gov. Deval Patrick recently approved it. Now is the time for consumers to stand up and fight yet another tax.
Separate And Unequal
There is a word for all this: Discrimination. And in this context, it violates the U.S. Constitution. Because of this tax, the Commonwealth could be required to refund more than $11 million per year in taxes to satellite TV customers.
Why is the recently approved tax unconstitutional? Because it illegally discriminates against interstate commerce, which is impermissible under the commerce clause of the U.S. Constitution. While the Commerce Clause is not as well-known to the public as, say, the First Amendment, it plays a vital role in the health of our national economy.
The founders adopted the commerce clause to address a problem that almost scuttled our nascent republic — the propensity of each state to find ways to benefit its own citizens’ economic interests, at the expense of out-of-state interests. They understood that they would never succeed in fostering a vibrant national economy if each state was left to indulge its worst protectionist tendencies. So they entrusted the courts with the responsibility to enforce the prohibition against favoring local economic interests over out-of-state interests.
While arguments will be made on both sides of this issue, in the most fully developed court case to date, taking place in Ohio, a state’s decision to tax satellite and not cable is in serious jeopardy.
In addition to the legal reasons involving the commerce clause, the tax is especially unfair to rural subscribers, who are penalized for subscribing to satellite TV even though cable won’t spend the money to serve them. Now that this discrimination has been allowed, it will mean that all consumers will pay higher prices, for cable providers will be free to charge their own customers even more.
The vast majority of states let cable and satellite compete for customers on a level playing field, encouraging their residents to choose between the two types of TV providers based on things like service, programming, and price. But rather than compete fairly, the cable industry and its army of lobbyists have used the economic crisis and the historic state budget crunch to gain a competitive advantage by taxing their only competitor.
The impact of this tax makes it of interest to everyone in Massachusetts, not just to the million households that subscribe to satellite TV.
Consumers should fight this unfair tax.
Joseph Widoff is the executive director of the Washington, D.C.-based Satellite Broadcasting & Communications Association.
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