Alameda and Watsonville Voters Should Vote ‘NO’ on Streaming Tax

By Gary Shapiro

Local ballot measures that will allow towns to tax streaming video services like utilities is the latest in a string of proposals at the municipal level to secretly tax consumers’ use of the Internet.

The “utility users tax” in cities including Alameda and Watsonville have historically been applied to only utilities. Now, city officials want to extend it to Internet apps such as Netflix, Hulu and Amazon Instant Video to collect fees for consumers’ use over-the-top (OTT) television services.

Streaming OTT video content is delivered via the internet, bypassing traditional system operators such as cable and satellite providers. Streaming services are breaking new ground, not just technologically, but also artistically — Netflix and Amazon took home multiple Emmys this fall.

What these cities seem to be ignoring is that this tax will be a major blow to millennials and low-income families, for whom streaming video services are affordable alternatives to a night out at the movies. More, the burden will rapidly grow if consumers subscribe to more than one service.

Designating innovative apps and websites as utilities for tax purposes sets a dangerous precedent. And unlike power, telephone, sewer and water companies, websites and apps do not require local infrastructure or take advantage of government-granted monopolies.

What is most concerning, however, is how local governments are making this happen.

Alameda and Watsonville are burying the tax hike language in upcoming November ballots to make it difficult for voters to know what they are actually deciding. Alameda mayor Trish Spencer voted against the measure being added to the ballot, and said it is “her job to ensure that ballot measures are made clear to voters” and that the UUT measure in Alameda “omits information.” Neither the Alameda nor the Watsonville ballot questions inform consumers that a ‘yes’ vote will add a tax to their streaming bill. If local governments want to tax a consumers’ use of apps and websites, they should make these measures clear to taxpayers in an up-or-down vote.

Critics understandably are also raising the worrisome scenario of a slippery slope, if you start treating websites and apps as utilities. If Netflix and Hulu are taxed as “utilities” today, music downloads, social media, and every website and app on the Internet may not be far behind.

Budgets shouldn’t be balanced on the backs of video streaming customers without their awareness or consent. Alameda and Watsonville voters should head to the polls November 8 to vote against Measures K1 and K in their respective cities. And cities such as Alameda and Watsonville should encourage innovative companies and services to provide low-cost alternatives for their constituents — not hide plans to make them more expensive.

Gary Shapiro is president and CEO of the Consumer Technology Association (CTA)®, the U.S. trade association representing more than 2,200 consumer technology companies, and author of the New York Times best-selling books, Ninja Innovation: The Ten Killer Strategies of the World’s Most Successful Businesses and The Comeback: How Innovation Will Restore the American Dream. His views are his own. Connect with him on Twitter: @GaryShapiro