Can New Chicago Taxes On Netflix, Apple, Spotify Withstand Legal Challenges?

Mr D from 63 writes: Today, a new "cloud tax" takes effect in the city of Chicago, targeting online databases and streaming entertainment services. Residents who stream movies and music from companies like Netflix and Spotify will now need to pay an additional 9% tax. This also applies to Chicago businesses that pay to use databases online. Chicago expects to collect $12 million a year as a result of the new tax ruling. From the 24/7 Wall St. story: "Also worth noting is that the city’s tax ruling in both cases avoids the issue of whether there is a close-enough connection (nexus, in legalese) to require providers like Netflix or others to collect either tax. International law firm ReedSmith weighs in on this point as well: '[O]nce the Department begins to audit and assess customers located within the city, many of those customers are likely to demand that providers collect the tax going forward. As a result, many providers will likely feel the need to register to collect the taxes, despite lacking nexus, and despite having strong arguments against the Department’s expansive interpretation of its taxing ordinances.'"

Comments

There is another possibility too..

[140Mandak262Jamuna]

International law firm ReedSmith weighs in on this point as well: '[O]nce the Department begins to audit and assess customers located within the city, many of those customers are likely to demand that providers collect the tax going forward. As a result, many providers will likely feel the need to register to collect the taxes, despite lacking nexus, and despite having strong arguments against the Department’s expansive interpretation of its taxing ordinances.'"

When the government starts auditing people and dunning for money, their first reaction is going to be, "how do I throw these clowns out of office?", they are not going to make a hue and cry and demand their service providers to collect taxes. These providers are also savvy, they will spend a little on lobbying, fund a few challengers and some incumbents ...

Knowing Chicago it looks more like another shakedown to get some campaign cash than to collect a new tax.

Re:Taxes

[penix1]

Meanwhile Mr. AC I am sure you are one of the first to scream when the government doesn't provide the services you think they should provide. Remember, there is no such thing as a free lunch!

Re:Taxes

[penix1]

And even then it is not free. Lots of hoops to jump through. Far more than the corporate welfare system we have.

Re:Taxes

[KingMotley]

What if I live in Chicago, but only use netflix while out of state?

Yeah, but I still don't see the problem

[rsilvergun]

you're still living very, very well. Also, these high level marginal tax rates are about the only thing that I've ever seen that solves the problems with income inequality. Specifically how a civilization leans towards oligarchy and stagnation as a smaller and smaller group of people claim all the money for themselves. Wealth builds on wealth, and at least here in America we don't see any end to that. The pie might get bigger, but if my slice gets tinnier ever year it hardly matters...

Put another way, I saw an interview with a multi millionaire complaining she didn't have any political voice anymore because the billionaires money crowded her out...

Re:Oh get over it.

[Dutch Gun]

And all those little taxes, from city, state, and country, all add up to between 40% and 60% of most US citizens' income. How much is enough? No one (well, maybe some nutjobs) wants to go back to laissez-faire, but I think it's not unreasonable to look at the amounts of graft and waste that occurs and demand better accountability before simply bending over for each new tax like a good, compliant citizen.

I have to wonder if the Chicago politicians even know what the hell they're really taxing when they attempted to tax all "cloud computing and streaming". It feels a lot more like a desperation move that they're hoping no one calls them on. Adding new taxes like this also increases the regulatory burden for its citizens and the city itself, which indirectly reduces the taxes effectiveness by increasing the overhead of compliance. It would be far better to simply adjust the property tax rate to match the expected revenue increase. Of course, that's a lot more visible, and the taxes there are already apparently pretty terrible, which is why they probably balked at that idea.

So, "get over it?" I wonder how many people will "get over it" by getting the hell out of Chicago - or at least the city itself? Having visited the area recently, I can assure you that there are lots of very expansive and attractive outlying towns and suburbs suitable for both homes and businesses.

Re:Taxes

[GrahamCox]

People really think like this? Really? I'm sorry for you. Somehow, you've been brought up to be a sociopathic moron.

Life is better when people cooperate and look out for each other. That's what has made the human race so successful as a species. If that's not your experience, again, I'm sorry for you. However, if you expect people to look out and care about you, then you have to look out and care for them, at least just a little. And in the modern world that means that you pay taxes.

You might feel that your taxes are not well spent, or that they only end up in the pockets of the corrupt, or the already well-off. That's obviously bad, but it's not the fault of taxes in themselves. Maybe you should stop voting for idiots and corrupt politicians, and do something to ensure that your taxes are used equitably.

But if you disagree with the whole premise, then that just means you're as greedy and selfish as they are.

Basically, you can only spend so much

[rsilvergun]

it has to do with how a dollar circulates. I'm in pretty bad shape financially. I had 3 close family members get hit with major illnesses all at once. I'm still recovering and I'm not sure I ever will. What I'm saying is I spend just about ever dollar I get my hands on paying debt and buying food/shelter/transportation. There's a little discretionary funds in there for my kid. I try to let her do thing things her friends (who's parents didn't get economically cock punched non stop for 10 years) do.

Now take a Donald Trump. No matter how greedy he is there's only just so much he can buy. At some point his money is just sitting around, doing nothing. He'll invest some of it, lose some of it, etc. But He's only got so much time in the day to do that. Eventually it becomes a war chest laying around doing nothing.

When we take it even further, to the level the Waltons have achieved what we have is pretty much the dark ages. You've got a small group of folks with _all_ the wealth. They're more or less Gods (Divine Right of Kings, anyone?). They stop investing because, heh, why should they? They already have the best civilization has to offer. As a result things can really only get worse for them.

If the above sounds complicated it's because it is. That's what makes cutting the marginal tax rate so seductive. It sound like an easy answer to the world's problems. Supply side economics, right? But there really is a reason we called them Voodoo Economics...