If you’re a cable television subscriber, you may have seen Sheriff Joe Arpaio make a pitch for what is known as the “First Responders Bill” in the state Legislature. It is a bill with two noble objectives; unfortunately the methodology is flawed.
Actually, there are several First Responder bills in the House and Senate. In a nutshell, they would impose a 4.5 percent tax on satellite television service, with the proceeds going to help cities and towns pay to upgrade inadequate and outmoded emergency communications systems. The upgrades are vital not only to enable quick, effective response to emergencies by police and firefighters, but also to ensure coordinated response in the event of a major terrorist attack.
This is no small undertaking. Tim Hill of the Professional Fire Fighters of Arizona tells us that upgrading all the antiquated emergency communications system in the state would cost at least $200 million, and as much as $300 million. The Legislature has not allocated any assistance, meaning the cities and towns are on their own despite tight budgets.
Taxing the roughly 500,000 satellite TV subscriptions in the state would generate about $12 million a year to help pay for the upgrades. The tax would also “level the playing field” between satellite operators and cable television operators, who already are required to pony up about 5 percent of revenues to cities and towns where they do business.
We’re all for fairness in the business world and elsewhere. But, as we’ve said many times in the past, what really isn’t fair is the way municipalities have used cable providers as cash cows. Although services in Arizona generally aren’t subject to taxation, cable providers have been singled out for these special fees (cities don’t call them taxes) because they use public rights-of-way for their cables. But while they do rip up streets to install their cables, they generally are required to return them to like-new condition. Hence, most of the rental or use fees provide a lucrative revenue stream for cities.
Tacking a 4.5 percent tax on satellite subscribers may level the playing field for the cable and satellite industry, but it compounds the unfairness to the taxpaying public.
We suggest the Legislature not act on the First Responders bills this session, but include this issue in upcoming discussions on proposed reforms of the entire state tax code. One of the centerpieces of reform is to lift the sales-tax exemption from services while lowering the overall sales tax rate.
That would provide an opportunity to ensure that both cable and satellite systems are treated fairly with respect to taxation.