Political Insanity – Taxing your use of the cloud

If you’re an elected official, it seems like there are just never enough taxes to make you happy. When Chicago’s mayor (the infamous Rahm Emanuel) proposed a 9% “Amusement Tax” on the act of watching Netflix and other cloud services, the good people of Cook County reached their limit of tolerance. Bear in mind this would be in addition to a number of taxes already charged by the city and state to the local internet provider. Illinois state law does provide an amusement tax on certain tickets to live  sporting events, plays, etc., which Mayor Rahm (never let a crisis go to waste) Emanuel interprets as applying to watching the ballgame on your TV.

I wonder if Mr. Emanuel were to invoke consistent logic if he would apply the same tax to Chicago residents watching a purchased DVD of Gone with the Wind as he plans to place on the version you stream on Netflix. After all, you’re watching the same movie either way.

Fortune magazine had the same thought when they said:
“. . . the lawsuit also says the Chicago-streaming tax violates the federal Internet Tax Freedom Act, which forbids states and cities from imposing discriminatory internet-only taxes. Specifically, the Chicago subscribers claim the tax is illegal because it treats streaming differently from DVD-by-mail services and also imposes a higher rate than various live forms of entertainment.”

In my opinion, the mayor has about as much understanding of the internet and tax law as the character in the video below. The clip is from a movie based on misunderstanding how the “internet cloud” really works.

To help Rahm out,the Supreme Court requires a “physical nexus” for a local tax to be valid. City and state governments appear to taking a more aggressive approach when it comes to defining that nexus. According to Rebecca Newton-Clarke, a tax expert with Thomson Reuters, the governments are likely to continue pushing the definition of nexus in the absence of further clarification from the Supreme Court.

In the meantime, consumers in more places are likely to face new fees on their favorite streaming entertainment.”

If you’d like to express your thoughts on this (so it doesn’t give Atlanta any ideas) here’s the mayor’s Facebook page.