Legislature wants its MTV tax

04/16/2005
The News Tribune
Joseph Turner

Higher taxes on cable and satellite TV companies might provide up to $10 million a year to cities and counties that were hit hardest by the repeal of the statewide car tax in 2000.

A committee in the state House of Representatives voted 5-4 Friday to recommend an 8.5 percent utility tax on subscription television businesses.

The Finance Committee's vote was along political party lines, with Democrats in the majority.

Currently, the cable and satellite TV industries pay a state business tax of 1.5 percent. If Senate Bill 6050 becomes law, that business and occupation tax would go away and be replaced by the 8.5 percent utility tax.

Satellite TV providers, such as DirecTV and Dish Network, contend the measure gives their competitors in the cable TV industry a better deal because SB 6050 would give cable companies a credit against other taxes.

For instance, if a cable company such as Comcast already pays 5 percent of its earnings to a city or county in the form of franchise fees and local utility taxes, the cable company would have to pay only 3.5 percent in utility tax to the state.

Robert Mercer, public relations director for DirecTV in El Segundo, Calif., said the new tax would be unfair to the estimated 500,000 satellite TV customers in Washington, many of whom live in rural areas and can't get cable service.

"These folks have really no other way of receiving their television service," he said.

The state utility tax would be passed on to customers, he said.

Mercer said the franchise fees that cable companies pay are not taxes but rental fees that local governments charge to let cable companies use the public right-of-way.

Ron Main, lobbyist for the cable industry's Broadband Communications Association, said cable companies wouldn't be getting special treatment by receiving a credit against local taxes.

In many parts of the state, including in Tacoma and Seattle, cable companies have to pay as much as 13.5 percent in local utility taxes and franchise fees.

On the other hand, he said, federal law prohibits cities and counties from imposing similar fees and taxes on satellite TV companies.

Even if the state enacts an 8.5 percent utility tax on both industries, cable TV customers would still pay much more than satellite customers, Main said.

Mercer said the satellite industry is likely to challenge the state utility tax in court if it becomes law.

Cities and counties have been looking for a regular source of state funding ever since voters passed Initiative 695 in 1999. That measure sought to repeal the state motor vehicle excise tax, which generated about $800 million a year for the state. Although I-695 was ruled unconstitutional, then-Gov. Gary Locke and the Legislature abolished the tax anyway.

That cost local governments about $200 million a year - mostly in cities and counties that don't collect much sales tax because they don't have as many retail businesses.

At first, the Legislature "backfilled" about half the money, some $100 million a year.

But that declined to only $7 million last year and is scheduled to go away unless the Legislature does something this session.

SB 6050 would dedicate most of the new TV utility taxes as "backfill" for 169 of the state's 281 cities and 21 of its 39 counties.

Lakewood, Steilacoom, Edgewood, University Place and Fircrest - all in Pierce County - and Des Moines in South King County would get $100,000 a year, the maximum for cities. That group uses most of the backfill for police and criminal justice programs.

Tacoma and Pierce County would get nothing from the new backfill program.

Republican members of the House Finance Committee objected to raising taxes in order to earmark money for cities and counties most affected by I-695.

SB 6050 now becomes part of the discussions being held to reach a compromise on a two-year, $26 billion state budget. The Legislature is scheduled to adjourn April 24.

Where the tv tax would go locally

Annual payments to South Sound cities and counties if the Legislature raises taxes on cable and satellite television companies:

Mason County $223,736

Des Moines $100,000

Edgewood $100,000

Fircrest $100,000

Lakewood $100,000

Steilacoom $100,000

University Place $100,000

Black Diamond $92,252

Covington $66,900

Thurston County $53,770

Buckley $26,138

Carbonado $23,277

Orting $22,802

Wilkeson $12,980

South Prairie $9,166

Algona $8,096

Concrete $6,540

Ruston $4,500

Centralia $1,392

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