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Cities across California, from Sacramento to Santa Barbara to Glendale, have been paying consultants and a lobbying firm to figure out ways to raise taxes on their residents who use video streaming and conferencing services like Hulu, Netflix, or Zoom.
Avenu Insights, which uses the benign moniker “revenue enhancement” in place of tax increases, has raked in millions of dollars advising cities on how to apply legacy utility user taxes (UUTs) — meant for cable television, water, and electricity—to online services.
Your tax dollars at work—paying consultants and lobbyists to help raise your taxes.
Avenu Insights sells an appealing narrative to cities. Local governments are “losing” revenue as residents cut the cord and use Internet-based streaming and communication services in place of cable television or the copper telephone network. The firm helps cities “recover” that revenue by simply changing the definition of “utility” to include everything from Netflix to Microsoft Teams.
Case in point: Santa Barbara simply declared ESPN+ a utility and voila—it cost residents nearly 6% more per month. Disney has sued the city and the case is ongoing. While California law requires cities in the Golden State to get voter approval to raise residents’ taxes, Avenu Insights argues that applying legacy taxes to new services is an end run to that required voter approval. Cities can simply raise the price of popular services overnight through definitional fiat.
For the moment, let’s set aside that the regressive nature of raising taxes on streaming services used by 99% of Americans will fall hardest on low-income Californians.
The purpose of UUTs is for cities to recover the costs they incur by maintaining the rights of way used by cable TV or gas and electric lines. When residents watch a Netflix show or FaceTime their relatives, they’re not straining city resources. These services are delivered over mixed-use infrastructure like cable and phone lines or wireless towers and satellites. Moreover, since residents are often accessing these streaming services outside their physical residences via the Internet, it makes little sense for the UUTs to be used to reimburse for the use of these non-existent city resources.
Even if broadband Internet were a “utility,” a topic of much dispute, the federal Internet Tax Freedom Act bans state and local governments from taxing broadband or certain “online activity” to prevent price increases that might depress Internet adoption. At best, applying local UUTs to video streaming violates the spirit, if not the letter, of that law, and courts have generally held that applying cable franchise fees to platforms that don’t use city facilities is illegal.
It is true that cord cutting and the decline of traditional landline telephone service have meant decreased UUT revenue for some cities. Changes in technology, the marketplace, and consumer behavior are inevitable. Cities should not have assumed that user fees on certain services would stay constant forever. Just as media companies are adjusting to the market demand, it is incumbent on politicians to manage their finances in a responsible way that accounts for potential changes and fluctuations.
Moreover, California residents are already struggling. The Golden State boasts the nation’s highest sales tax, highest gas prices, and a cost of living second only to Hawaii. The last thing Californians need is their local governments raising their Netflix price.
In a recent webinar, Avenu Insights advised cities to “capture all forms of telecommunication,” including video conferencing and streaming video. “Streaming in particular is a significant source of potential revenue,” said Ben Ray, a partner with JarvisFay, while lamenting that the “streaming industry is trying to resist this.” He also warned of the “bubbling” issue of “taxing bundled video services,” noting potential complications with taxes on Amazon Prime video or Microsoft Teams, platforms that are bundled with other services like two-day shipping and word processing.
No doubt Avenu Insights can help cities navigate those complications and grab some revenue, and the firm has every incentive to do so. A contract between Avenu Insights and the city of Sacramento, revealed through a public records request, shows that the firm not only gets paid a consulting fee, but gets a 20% cut of any revenue the city obtains through “audits” of “utility providers.” In other words, if cities suddenly decide that streaming services like Hulu are “utilities” that are tax delinquent, Avenu gets a nice chunk of those back taxes.
At minimum, cities should be transparent about what they’re doing and who they’re paying. If voters knew their tax dollars were being used to pay lobbyists and consultants to help cities impose Internet taxes while giving those consultants a kickback of the audit revenue, they might not be so supportive. If cities are trying to avoid the sunlight when it comes to UUTs, then they’re probably up to no good.
David Williams is president of the Taxpayers Protection Alliance.
Cities across California, from Sacramento to Santa Barbara to Glendale, have been paying consultants and a lobbying firm to figure out ways to raise taxes on their residents who use video streaming and conferencing services like Hulu, Netflix, or Zoom.
Avenu Insights, which uses the benign moniker “revenue enhancement” in place of tax increases, has raked in millions of dollars advising cities on how to apply legacy utility user taxes (UUTs) — meant for cable television, water, and electricity—to online services.
Your tax dollars at work—paying consultants and lobbyists to help raise your taxes.
Avenu Insights sells an appealing narrative to cities. Local governments are “losing” revenue as residents cut the cord and use Internet-based streaming and communication services in place of cable television or the copper telephone network. The firm helps cities “recover” that revenue by simply changing the definition of “utility” to include everything from Netflix to Microsoft Teams.
Case in point: Santa Barbara simply declared ESPN+ a utility and voila—it cost residents nearly 6% more per month. Disney has sued the city and the case is ongoing. While California law requires cities in the Golden State to get voter approval to raise residents’ taxes, Avenu Insights argues that applying legacy taxes to new services is an end run to that required voter approval. Cities can simply raise the price of popular services overnight through definitional fiat.
For the moment, let’s set aside that the regressive nature of raising taxes on streaming services used by 99% of Americans will fall hardest on low-income Californians.
The purpose of UUTs is for cities to recover the costs they incur by maintaining the rights of way used by cable TV or gas and electric lines. When residents watch a Netflix show or FaceTime their relatives, they’re not straining city resources. These services are delivered over mixed-use infrastructure like cable and phone lines or wireless towers and satellites. Moreover, since residents are often accessing these streaming services outside their physical residences via the Internet, it makes little sense for the UUTs to be used to reimburse for the use of these non-existent city resources.
Even if broadband Internet were a “utility,” a topic of much dispute, the federal Internet Tax Freedom Act bans state and local governments from taxing broadband or certain “online activity” to prevent price increases that might depress Internet adoption. At best, applying local UUTs to video streaming violates the spirit, if not the letter, of that law, and courts have generally held that applying cable franchise fees to platforms that don’t use city facilities is illegal.
It is true that cord cutting and the decline of traditional landline telephone service have meant decreased UUT revenue for some cities. Changes in technology, the marketplace, and consumer behavior are inevitable. Cities should not have assumed that user fees on certain services would stay constant forever. Just as media companies are adjusting to the market demand, it is incumbent on politicians to manage their finances in a responsible way that accounts for potential changes and fluctuations.
Moreover, California residents are already struggling. The Golden State boasts the nation’s highest sales tax, highest gas prices, and a cost of living second only to Hawaii. The last thing Californians need is their local governments raising their Netflix price.
In a recent webinar, Avenu Insights advised cities to “capture all forms of telecommunication,” including video conferencing and streaming video. “Streaming in particular is a significant source of potential revenue,” said Ben Ray, a partner with JarvisFay, while lamenting that the “streaming industry is trying to resist this.” He also warned of the “bubbling” issue of “taxing bundled video services,” noting potential complications with taxes on Amazon Prime video or Microsoft Teams, platforms that are bundled with other services like two-day shipping and word processing.
No doubt Avenu Insights can help cities navigate those complications and grab some revenue, and the firm has every incentive to do so. A contract between Avenu Insights and the city of Sacramento, revealed through a public records request, shows that the firm not only gets paid a consulting fee, but gets a 20% cut of any revenue the city obtains through “audits” of “utility providers.” In other words, if cities suddenly decide that streaming services like Hulu are “utilities” that are tax delinquent, Avenu gets a nice chunk of those back taxes.
At minimum, cities should be transparent about what they’re doing and who they’re paying. If voters knew their tax dollars were being used to pay lobbyists and consultants to help cities impose Internet taxes while giving those consultants a kickback of the audit revenue, they might not be so supportive. If cities are trying to avoid the sunlight when it comes to UUTs, then they’re probably up to no good.
David Williams is president of the Taxpayers Protection Alliance.
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It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making it look like readable English. Many desktop publishing packages and web page editors now use Lorem Ipsum as their default model text, and a search for ‘lorem ipsum’ will uncover many web sites still in their infancy.
The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making
The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making it look like readable English. Many desktop publishing packages and web page editors now use Lorem Ipsum as their default model text, and a search for ‘lorem ipsum’ will uncover many web sites still in their infancy.
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