H.R. 3679, “The State Video Tax Fairness Act of 2007,” would thwart the efforts of states to ensure that all multichannel video providers (e.g. cable and satellite television providers) operate on a level playing field with respect to taxes, fees, and other charges assessed by state and local governments.

Despite its title, the bill does nothing to promote tax fairness.  Instead, H.R. 3679 would lock-in the unfair burden already shouldered by cable customers in 44 states and the District of Columbia who pay more in state and local taxes and fees than subscribers of satellite (DBS) television service.

DBS already enjoys preferential tax treatment.  Under Section 602 of the 1996 Telecommunications Act, DBS is exempt from having to collect or remit local taxes and fees that cable operators have to pay.  The average monthly taxes and fees on cable services is approximately 11 percent (Heartland Institute, May 2007), and almost all states impose higher taxes and fees on cable than DBS.

The 1996 tax break for DBS is no longer needed or fair.  DirecTV and EchoStar are now the second and third largest video distributors in the United States with a total of over 30 million subscribers.  They are Fortune 500 companies that do not need any further tax advantages over their cable, phone, and wireless competitors.

In seeking to promote the widely shared and bipartisan goal of tax parity for providers of video services, some states have sought to ensure that the overall level of taxation is equal among providers.  Nothing in current Federal law prohibits states from pursuing this goal, and in fact several Federal courts have upheld state tax parity laws against challenges brought by the DBS industry.  But legislation such as H.R. 3679 would tie the hands of the states who seek to ensure overall tax parity.

H.R. 3679 would also likely result in a direct increase in aggregate taxes on cable customers in states that have enacted fair-minded tax parity laws and prevent other states from passing such laws.  The result will be higher cable rates for consumers and a competitive disadvantage for cable operators.

Oppose H.R. 3679: Congress should support the rights of states to fairly equalize the total tax burden between competitive industries and reject the DBS operators' anti-competitive attempts to raise cable's state sales taxes and the price of cable service.

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