The WasteWatcher: The Staff Blog of Citizens Against Government Waste

California's "Netflix Tax"

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.


Cities in the Golden State are exploring what they might call a “golden opportunity” to compensate for the loss of tax revenue from declining cable-television subscriptions as more Americans choose video streaming services like Netflix and Hulu.

An estimated 45 cities in California – including Glendale, Menlo Park, Pasadena, and Sacramento – could end up making changes to their utility tax codes in order to implement what is being referred to as the “Netflix tax.”  Pasadena has already announced that it intends to impose a 9.4 percent video streaming tax on its residents.

For consumers, the monthly increases could add up over time, depending on how many video streaming services to which one subscribes.  Using 9.4 percent as a model, subscribers to Netflix will see their bill increase from $9.99 to around $10.93 per month, and Hulu subscribers would see a monthly bump from $8 to $8.75.  

The “Netflix tax” opens the door to double taxation, since most residents will be taxed on a combination of cable, internet, and/or video streaming services.

Even though the backlash by Pasadena residents was fierce, local legislators across the state seem far more interested in raising tax revenues than addressing issues important to their constituents.

The legal objection to these taxes is based on the passage of Proposition 218 in 1996, which prevents cities and counties from raising taxes without voter approval.  The “Netflix tax” is likely in violation of the Internet Tax Freedom Act, which imposed a strict ban on federal, state, and local governments from taxing internet access and from imposing discriminatory internet-only taxes.

Indeed, Chicago is currently being sued by the Liberty Justice Center Legal group for charging a 9 percent tax on video streaming services on grounds that the tax is unconstitutional under state and federal laws.  Even though California cities have yet to begin collecting the “Netflix tax,” it is likely that residents will begin suing the cities imposing this tax, costing taxpayers millions of dollars in legal fees in the process.

Cities and counties claim they need to impose these taxes because the day of reliable revenue from cable is over.  Consumers are able to digest the daily news, shop for apparel, and even watch movies and television online.  After life has become more convenient through technological innovations, governments have now come knocking for their pound of flesh.

Lawmakers are looking to replace this revenue with a video streaming tax.  For example, Pennsylvania currently imposes a 6 percent sales tax on everything from app downloads to video streaming.

Businesses that provide video streaming services must now navigate through a complex web of state, county, and city tax codes to be compliant; the cost of these new taxes will simply be passed onto consumers.  And rather than spending money on regulatory compliance, companies like Netflix and Hulu should be using their revenue to enhance their technology and services.

With the government attempting to tax nearly every aspect of our lives, the last thing hard-working Americans need now is to cough up more money for simply enjoying their favorite movie or television show, regardless of where and how it is viewed.  Apparently, watching “anywhere, anytime” is turning into “taxing everywhere, every time.”

Issues/Topics: 

Sign Up for Email Updates!Click Here!

View Archives

Posts by Author

Posts by Tag

Big Government (151) Waste (72) Obamacare (69) Budget (66) Healthcare (66) Congress (59) Uncategorized (56) Telecommunications (49) Debt (43) Technology (42) Internet (42) Deficit (42)