Cable Industry Seeks Tax on Satellite Subscribers

October 3, 2005

Citing unfair price competition, the cable industry is asking the Massachusetts legislature to impose a 5 percent tax on satellite television. From Fox 12 News in Providence:

Massachusetts residents who receive satellite television service would face a new five percent tax under the terms of a proposed bill on Beacon Hill.

It’s legislation the cable TV industry is pushing because satellite providers such as DirecTV are competing with them for subscribers.

But wording in the bill — written by the cable industry — would then nullify the charge for cable subscribers because they already pay up to five percent in so-called franchise fees.

Cities and towns have traditionally charged cable companies the fees to compensate a community for stringing wires and digging up roads to provide their service.

Satellite companies have been spared the fees because their service does not rely on public infrastructure.

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Making cable companies (and their subscribers) pay for infrastructure projects they exclusively benefit from is consistent with the benefit principle of taxation. Why should those who will never receive cable pay for the digging of cable lines?

Just because satellite companies can produce a similar product to cable companies without having to pay the costs of laying cable does not imply that lawmakers should use tax policy to “even out” the two prices. If one company can produce at a lower price than its competitors, don’t we usually consider that to be a good thing in the marketplace?

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