Let’s face it, websites and apps are nothing like utilities, and it defies logic for California municipalities to tax them that way. But that’s not stopping cities like Alameda and Watsonville from trying to pass deceptive ballot measures on November 8 that would allow them to do just that.
Officials in these two cities are banking, quite literally, on the notion that their voters will pass a measure to “modernize” what’s called a Utility Users Tax (UUT) without realizing that these measures are actually a backdoor way at getting voter “permission” to, for the first time ever in California, tax websites and apps like Netflix and Hulu as utilities.
While Alameda’s Measure K1 claims that the “modernization” will raise revenues by more fairly taxing cell phone plans, buried deep in the legalese of the measure – and not mentioned in public descriptions – is language that expands the city’s traditional “cable television” utility tax to include video streamed online. Watsonville’s UUT modernization act, Measure K, is no better.
Why is this new tax being hidden from the public? Because no reasonable Californian would agree that Netflix, or any other online video streaming service, is a utility like electricity and water. Simply put, websites and apps don’t rip up your roads and there is robust competition in the marketplace.
Unlike utilities, websites operate in a highly competitive environment, with alternate choices just a click away and costs for switching services almost non-existent. Think about how easy it was to sign up or unsubscribe from one of these services. You can do it at any time, from anywhere, instantaneously.
Compare that to your local electricity or gas company. If you’re lucky, you have two choices for those services and it’s a cumbersome process to sign up, switch, or even pay for it.
Despite these and other important differences between utilities and video streaming services, Watsonville and Alameda aren’t isolated examples of cities attempting to pursue legal loopholes to levy utility-style taxes on websites and apps without any public process.
In backrooms across California, unelected officials from dozens of municipalities are currently considering similar new taxes. This is all being done quietly of course, without true input from the voting public, in order to avoid the public backlash that would likely occur as the result of such an unpopular move.
Allowing public officials to arbitrarily impose utility taxes on non-utility businesses for the sake of raising revenue sets a dangerous precedent in California. If we allow these new taxes to be put in place without due process and debate today, there is no limit to the types of online activity that could be taxed in the future. It opens the floodgates for new taxes on all manner of online services, from music streaming to social media platforms.
Thanks to Proposition 218, Californians are entitled to a vote on any new tax increase. The Internet Association urges the residents of Alameda and Watsonville exercise that right by voting NO on measures K-1 and K, respectively. Websites and apps are not utilities and they should not be taxed as such.