As technology changes, municipalities change their ways to capture tax revenue

More Americans are streaming television and movies. This means municipalities need to reconsider cable taxes. Here is one example from the Chicago suburbs:

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Village trustees Monday voted 4-2 to approve the 5% entertainment tax as part of its upcoming budget. The tax would take effect July 1.

Village officials budgeted $25,000 in revenue from the new tax, which would tack 77 cents onto a standard monthly Netflix subscription costing $15.49 or 15 cents to an Amazon video rental costing $2.99.

“This is a modern version of the original telecommunication tax,” Village Administrator Erika Storlie said, adding that the village has seen a decrease in taxes collected from cable subscribers as more people drop cable television in favor or streaming services…

Chicago adopted an entertainment tax charging 9% on streaming services in 2015. In March, a judge dismissed a lawsuit filed by Apple Inc. challenging the tax. Though Apple’s complaint was dismissed, the judge left the door open for Apple to file an amended complaint.

Evanston, where Storlie served as city manager before coming to East Dundee, has charged a 5% entertainment tax on streaming services since October 2020.

Several thoughts about this:

-This is a relatively small tax in this community: the story above suggest its will generate $25k in revenue. Even in a small suburb, the money this generates will only do so much?

-I could imagine the argument that infrastructure is required to provide streaming services and taxes like these would help communities cover these costs. (I could also imagine – very faintly – the logic of a vice tax to limit the hours upon hours that Americans spend in front of televisions and screens…but limiting television watching via taxation seems somehow un-American. )

-I do not recall seeing much about public discussions of such taxes within communities. Is the tax so small that it does not attract much attention? Do residents not have a compelling argument against a streaming tax?

-Entertainment taxes are sometimes used for visitors or more public activities such as tickets for sporting events or theater shows. A streaming tax is aimed more at residents than visitors.

Many municipalities need consistent tax revenue streams as they look to provide services and balance budgets. This is one way to help achieve that goal.

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