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Netflix vs politicians

I’m sure Netflix is more popular than any politician

So says “Kilroy”, commenting on a DSL Reports post about Netflix being charged a 9% amusement tax by the City of Chicago. He suggests that Netflix should just stop selling services to people in Chicago and instead direct them to their local lawmakers. If it happened it would be a fine example of a company refusing to cave in, but it is unlikely. According to The Verge, “Netflix says it’s already making arrangements to add the tax to the cost charged to its Chicago customers.”

According to Ars Technica, what might stop this are conflicting federal telecommunications laws.

On Reddit someone pointed out that this is rather in conflict with the idea of net neutrality.

A side discussion on Reddit is about the extent to which companies can shop around for cities with favourable laws. Someone said, “see Detroit“. Did business move out of Detroit because of unfavourable laws and taxes?

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41 comments to Netflix vs politicians

  • John Galt III

    The left only knows how to destroy. It creates nothing. The Democrats have run Chicago and Illinois into the ground. Illinois isn’t our Greece, that is Puerto Rico, run by left wing lunatics since WWII, but Illinois will go soon enough. We have already seen Detroit and Baltimore. Chicago will follow unless Obama hands them $50 billion or so on the way out the door in January 2017.

    The left all over the OECD world is trying to keep the Marxist Ponzi welfare states afloat. It will use draconian taxation, capital controls, severe regulation and every other tactic as it runs out of money. Keep your eye on Japan, Italy, France and so forth. They go first then the rest. Time – maybe by 2024 it’s all over and there is a worldwide currency reset as the dollar will lose its reserve status. Then the Ponzi scheme promises will be nothing but promises.

  • Illinois – where the money came from – where it went

    https://www.illinoispolicy.org/3-prevailing-budget-truths-for-illinois/

    It is not a lack of money that is causing the problem. It is a lack of spending control.

  • Fraser Orr

    > It is not a lack of money that is causing the problem. It is a lack of spending control.

    Specifically, as called out in your link, it is the state pension fund that is the biggest problem (though it is Illinois, so it is profligate everywhere.)

    I find the whole idea of a state pension scheme like something out of the 1950s. Why don’t government workers just have 401ks like the rest of us?

    Really, if anything would bring back a sense of liberty to America, it would be the privatization of the school system. As I have said before, if the state wants to fund the education of children then do that.

    Instead they run the education system, and run it exceptionally badly. Imagine if instead of food stamps the poor had access to government supermarkets stocked by government farms, run by government employees.

    What would those supermarkets look like? Yup, pretty much like the public schools.

  • Eric

    I find the whole idea of a state pension scheme like something out of the 1950s. Why don’t government workers just have 401ks like the rest of us?

    Because states don’t have to account for pensions the same way businesses do. My brother works for a city in a state where city employees are part of the state pension system. For the first fifteen years or so every time his contract came up for negotiation the city said something along the lines of “Gosh, we’d sure like to give you a bigger raise, but we just don’t have the money. How about you accept a 5% increase in your pension instead?”

    From the standpoint of this year’s budget, that 5% is free money. The extra obligation doesn’t count as an on-the-books liability like it would for a company. If he’d had a 401(k) instead they couldn’t have magicked up the money they’re obligated to pay in the future and would have had to pay higher salaries from the current budget. It’s a form of borrowing.

    King Eric I’s first official act would be to force cities and states to properly account for these kinds of liabilities.

  • Did business move out of Detroit because of unfavourable laws and taxes?

    Not so much that, but given the choice between paying high taxes to live in an expensive, crumbling city with poorly maintained infrastructure or building new facilities elsewhere they chose the latter.

    New for old
    Nice for shitty
    Cheap for expensive

    You can be sure that places like Dearborn gave them planning freedom, 20-year tax exemptions and everything to move there. Why wouldn’t they?

    What could Detroit offer as an incentive to stay? They struggled to break or change their union contract when they went bust FFS!

    To offer an equivalent package to Dearborn would have just meant they went bust quicker.

    It was public sector unions that killed Detroit.

  • Laird

    Eric, I certainly agree, but it would be difficult to make the case that the states should do that when the federal government doesn’t either.

  • Fraser Orr

    One thing I meant to say — why exactly would Netflix refuse to do business in Chicago because of the tax? It is just more subscribers. I imagine less subscribers than without the tax, but all dollars are green. Their job is to make money for the shareholders not make a point or try to bring about a libertarian utopia.

    > King Eric I’s first official act would be to force cities and states to properly account for these kinds of liabilities.

    Really dude? That is the first thing you’d do? I can think of lots of things I’d do before that — though I agree it is a perfect case of “do what I say not what I do”, governments never dogfood.

  • Eric

    Laird, you have to start somewhere. Since cities and states don’t control the money supply I figure that’s a good place.

  • Eric

    Really dude? That is the first thing you’d do?

    Sure, after taking care of my own needs, of course. It’s good to be the king.

  • Nicholas (Self-Sovereignty) Gray

    MSimon- Your last two sentences make up one tautology. If you lack a spending limit, then you will ALWAYS have a lack of money! How could it be otherwise?
    And I think that the name causes some worries. It sounds french. Detroit, from de troit? In a land of war-loving primates, anything that reminds you of surrender monkeys would be a name to avoid!

  • RRS

    The fascinating thing here is HOW Mancur Olson’s “Stationary Bandit” is attempting to fit an old form of **consumption** tax to tax an activity.

    The activity on point is using an electronic device for (receiving) communication (internet content).

    The activity (on analysis) could just as well be chewing gum (that you bought in Georgia) on your couch in Chicago.

    Now, they can no doubt find a basis for taxing access to the internet (like the telephone utility fees) even by the *amount* of usage, but taxing *what* you watch, would be something like charging for with *whom* you have telephone texts or chats.

    While consumption is an activity; every activity is not consumption (nor constitutes possession).

    Trouble ahead, regardless of the current cave-in.

  • William O. B'Livion

    > Did business move out of Detroit because of unfavourable laws and taxes?

    Michigan is not a “right to work” state and time was the Unions were *very* powerful there.

    Most of the manufacturing has moved from there to non-union states or countries.

  • Paul Marks

    Good post and comments.

    Places like Chicago are in their death agony.

    And like a wounded animal – the government there is thrashing out savagely.

    What will the United States government do when it enters de facto (even if not legal) bankruptcy?

  • Nicholas (Self-Sovereignty) Gray

    I think, seeing weakness, that China would become more aggressive about the senkaku islands, and the South China Seas, and the USA would then go on a war footing, and recover due to military spending, and having some external target to focus on. so outside events will save America- for now.

  • JohnK

    Nicholas:

    You surely do not accept the fallacy that military spending can cure an economy? I don’t see anyone arguing that military spending saved the Soviet Union.

    I know there is the theory that WWII brought an end to the Great Depression. Was this due to spending on war? Hardly. At the end of WWII, the USA was the only major power which had not been bombed to bits, and had all its major industries intact. Surely it was that which ushered in a golden age for American business for the next 25 years, as the rest of the world slowly rebuilt itself.

    If military spending made a country rich, the Vietnam War should have been a boom time for the USA (as opposed to McDonnell Douglas or Colt Armalite). Instead, 1971 saw Nixon close the gold window, and herald the era of funny money, which I feel is now coming towards its inevitable end.

  • I know there is the theory that WWII brought an end to the Great Depression.

    If that were the case, then we could get out of the current doldrums by bombing Chicago to smithereens.

    Instant stimulus!

  • Mr Ed

    It may be that in wartime, capital consumption increases, as production goods are not replaced, and funds that might have gone into investment are diverted elsewhere, on ‘current spending’, this may create an illusion of prosperity of sorts, as orders rise, and employment rises, but all the time, the ‘seed’ for the future harvests (as it were) is consumed.

    At the end of WW2, the UK could make no end of Lancasters, Tempests and Spitfires, trucks and ships, but not things that consumers actually wanted, needed or valued, and the crushing costs of capital reconstruction, rationing, taxation and dislocation of resources left the UK a poor, dreary place. Watch Passport to Pimlico, an Ealing Comedy, for a portrait of post-War Britain, and a fine libertarian line about secession and freedom, echoing the Berlin crisis, airlift and Stalin’s blockade.

  • staghounds

    “What will the United States government do when it enters de facto (even if not legal) bankruptcy?”

    By every standard, the United States Government would be eligible to file every kind of bankruptcy including straight up Chapter 7.

  • Watchman

    Chicago is a democratic city (albeit one which could do without being a Democratic city, and in entirely unconnected facts, is not quite as democratic as it could be) so they can raise an entertainment tax if they want.

    As this is a tax on consumption, it is easy for the company concerned (Netflix) to add this onto their bills. Presumably it will then appear as a separate item to explain the increased cost. So the people of Chicago can then see the effects of their elected government, and either vote to change it or accept it.

    In a free market for democracy (OK, that’s not something you really get in a country like the US where the parties have sown up the system) then people will choose whether they like this or not. My guess is that eventually they will not like it (people get smarter as they get more connected), but it may take some time.

  • Johnnydub

    Did business move out of Detroit because of unfavourable laws and taxes?

    Look at the movie business. Now, by far, the majority of US movies are made outside California.

    As other commenters have observed, unfavourable laws and taxes are a by-product of trying to service the wages and pensions of public sector workers, which will inevitably bankrupt the state anyway.

  • Mr Ed

    Presumably in Chicago, as a city under the State, it is a matter of State law what the city may tax and not tax (apart from those things regulated by the Congress as inter-state commerce, duties and excises etc.), so in a decent State, the State would have limited all subordinate jurisdictions in what they can tax.

    After all, if they can tax a subscription to an out-of-State provider, how long before they tax emails, web browsing (and, of course, all that comes with that), as RRS points out above.

    From the ‘amusement tax’ link:

    Chicago’s new tax is actually composed of two recent rulings made by the city’s Department of Finance: one covering “electronically delivered amusements” and another covering “nonpossessory computer leases.” Each one takes an existing tax law and extends it to levy an extra 9 percent tax on certain types of online services. The first ruling presumably covers streaming media services like Netflix and Spotify, while the second would cover remote database or computing platforms like Amazon Web Services or Lexis Nexis.

    So the City’s Finance Department came up with this plan. Does it extend to a tax on asking Siri questions and getting stupid answers? Does it tax sanctimonious pronouncements from, say, Apple?

  • Richard Thomas

    Mr Ed, indeed, since we have “Julie from Chicago”, perhaps Samizdata itself falls within the purview of this law.

  • Tarrou

    I live in Michigan, in a city very much like Detroit, though smaller. I doubt companies left Detroit at least at the beginning because of taxes. Many of the regulations and taxes were supported by the companies, and though high, they were structured for the benefit of those companies. But that would change over time. The companies left for a number of reasons, here are what I consider to be the most important:

    1:The juggernaut of union pensions slashing profits.
    2:Foreign competition slashing corporate profits. This makes all those high taxes harder to swallow.
    3: The race riots of the late ’70s hollowing out the white middle class suburbs. No one wanted to live or work in Detroit after that, and those workers became harder to get and more expensive.

    After those three things, companies were stuck selling shitty cars to an angry public for more money than the more reliable Japanese. Their workforce was aging and fleeing for less criminal climates, and the municipal death spiral had Detroit scraping every last dollar it could out of whoever was left.The taxes weren’t an existential problem on their own, but they became a part of a toxic cloud of corruption, corporate malfeasance and idiocy, union greed,anti-white racism and a culture of overpromising public goods that ran an economic powerhouse of a state into the ground within fifteen years.

  • Patrick Crozier

    Getting back to the original point, I believe that company directors have a duty to act in the best interests of shareholders. If they withdrew from a profitable market they could be liable.

  • RRS

    @ Watchman:

    While the subject assessments are on “spending,” they are not on consumption – they are taxes on activities (using specified facilities of the internet).

    Attendance at a movie house is an activity (the popcorn is consumption)the movie ticket bears a 9% tax; the popcorn bears the regular sales tax.

    The taxation of activities is always problematic for the Stationary Bandits. Generally, for the tax to be effective and practicable, the activities have to occur in a particular place or in some particular manner.

    @ Ed

    A caveat: In that description, the phrase:

    Each one takes an existing tax law and extends it to levy an extra 9 percent tax on certain types of online services.

    is misleading. The tax is not imposed on providing the services; it is imposed on using the services.

    Of course, there are “Sale and Use” taxes, practicable where there is a physical object (or transaction) of “use.” We may be observing an attempt to conjure up a quasi-physical set of objects (or transactions) being “used.” That will be hard to pull off.

  • Jerry

    ‘Imagine if instead of food stamps the poor had access to government supermarkets stocked by government farms, run by government employees.’

    Frasier Orr,
    Please DO NOT give the fools any ideas. They have enough of their own to finish destroying this country !!

  • RRS

    @ Watchman:

    In Chicago, like other cities of all times, there is a democratic process, but what it yields may not fall in any ideal concept of “being democratic.”

    The process there (as in many other places) produces conditions determined by a dominant minority (not necessarily exclusively racial or ethnic) of entrenched particular interest coalitions (let’s hear it Julie!).

    The American form (transient municipal oligarchies) of Pareto’s “Circulation of the Elites” has been stymied by the Chicago democratic process for about 75 years.

    The democratic process can be used for many objectives. In this subject matter it is being used by a dominant minority to retain delegated power and authority (not to be representative) in the deterioration from the prior uses (misuses?)of that process.

    “Democratic” describes a process, not a condition.

  • Laird

    “If that were the case, then we could get out of the current doldrums by bombing Chicago to smithereens.

    Instant stimulus!”

    Paul Krugman would agree with that strategy.

  • Julie near Chicago

    Well I never! Misstating my “handle” then putting ideas in the heads of evil-minded government capos based on that! I am not FROM Chicago, I’ll have you know. (Though I did do two TOD there, going to school. And although as a child and young adult I was in love with the place.) I’m NEAR Chicago, and not all that near at that, being perhaps 80 miles and three or four counties, depending on how you count, northwest of it.

    We have another Samizdatista from my current town, another from a suburb of the City of Radioactive Light, and one who actually inhabits the politically-accursed pace, or an adjoining suburb — I forget which, but you know who are, and I do apologize. We also have at least one former-Chicagoan expat, who now inhabits a state next door.

    I have no doubt that the Chicago Mob will reach out its tentacles one way or another to tax us all, and through its machinery in Washington it will hit Samizdata (or its ISP and WordPress) as well, but please don’t blame it on us co-Illinoisans. We beg for mercy as well as justice! (I do trust none of us voted for any of the dudes in power, save possibly Gov. Rauner, who does face a veto-proof Dem legislature in Springfield.)

    . . .

    RRS, if it is the attendance at the movie theatre — an activity — which is to be taxed, rather than the ticket one purchases that gives one the right to attend, then why is it not the eating of the popcorn there — an activity — which is taxed, rather than the purchase of the popcorn, which gives one the right to eat it?

  • Julie near Chicago

    RRS, above at 6:12 p.m.:

    Yes indeed: It IS the “dominant minority,” just as in any other regime. [In N.K. it is Kim Whatever (can never remember his name) and his crew — a “dominant minority” if there ever was one!] Anyway, RRS, as you know I do indeed take that view.

    . . .

    However: Yes, let us seize the reins of power! I call upon Samizdatistas near and far, at home and abroad, to send reams of nasty, insulting letters to all Chicago governmental personnel including janitors; to all Illinois governmental personnel ditto; and even to the Thing in the WH and all who inhabit the Beltway, Fairfax County, and the other wings of the Great Swamp on the Potomac who also serve government in any way.

    We will drown them in letters (and with luck shut down every switchboard between the WH and Penang, regardless of whether one goes east or west).

    Upon seeing such a striking show of power and force, I have no doubt that Samizdata will be allowed to carry on its subversive business of political, philosophical, and comic conversation uninfringed (and untaxed).

  • RRS

    Julie,

    if it is the attendance at the movie theatre — an activity — which is to be taxed, rather than the ticket one purchases that gives one the right to attend, then why is it not the eating of the popcorn there — an activity — which is taxed, rather than the purchase of the popcorn, which gives one the right to eat it?

    C’mon Julie, you’re yanking me chain!

    The tax is not on the ticket, its for using the purpose of the ticket.

    It makes no difference where you eat the popcorn, it is a physical substance consumed; different tax.

    But of course I rattled your chain ’cause “I knew where you live.” But that’s not a threat – its sympathy!

  • Julie,

    If you are located perhaps we should meet up some time. You still have my e-mail I trust.

  • Mooloo

    Really, if anything would bring back a sense of liberty to America, it would be the privatization of the school system. As I have said before, if the state wants to fund the education of children then do that.

    The State took over schooling from private hands long ago because fully private schooling is not possible with an even semi-modern economy. Someone has to teach the workers to read and write, but there’s no money in it.

    Private schooling left to its own devices would not take the poor. It would take the stupid and less hardworking, then expel them fairly quickly, in order to maximise profit. If it is compelled to take all students, then it is no longer truly private schooling. No-one with half a brain would invest in a private school that isn’t selective.

    Even the current vogue for fake private schools (academies, grant schools, charter schools etc) is hardly such a roaring success that everyone can’t wait to buy in.

    The best school systems in the world are all centralised public systems (Korea, Singapore, Japan, Finland etc). I’m all for capitalism, but it has historically been a disaster when applied to schools.

  • Julie near Chicago

    RRS,

    At this point, maybe we’re talking at cross-purposes. For one thing, when I wrote “eating the popcorn there,” I meant “eating the popcorn that the theatre’s concession stand was selling.” Shorter: “eating the popcorn for sale there,” but this phrasing is still open to misinterpretation. (Does the adverb “there” modify the verb “eating,” as you took it in my original comment, or does it modify the adjective phrase “for sale” — which itself modifies the word “popcorn”? It’s possible to read the fragment either way, although to me the most natural reading has “there” modifying “for sale.” I.e., For sale — where? Why, there, of course. At the movie theatre.)

    Still, it’s a wonderful illustration of the importance of phrasing things very, very carefully . One can only think clearly to the extent that one’s concepts and categorizations are consistent. So, no, I wasn’t yanking your chain (as in teasing you so as to get a humorous comeback that we could both enjoy, nor yet as in nit-picking for some mean and petty reason). My point was that that eating, which is the point of purchasing the popcorn, is just as much of an activity as “attending,” which is the point of purchasing the ticket. “To attend” and “to eat” are both verbs, which are, notoriously, “action words.” Or so we were taught in the Dark Ages of the Fifties.

    Pursuing the meaning of the words, trying to hitch them to the concept in such a way as to enable logical thought, was and is the point. Regardless of how the law as it is today is phrased, in the case we’re discussing, why isn’t it sensible to say that what’s being taxed is the sale of the right to eat the popcorn (or to throw it away, for that matter) and the sale of the right to see the performance? Technically, it doesn’t seem to me to make much sense to talk about taxing “attendance” nor taxing “the popcorn.” To be consistent, note that one purchases both the ticket and the popcorn with a certain end in mind — attending a movie in one case and eating the popcorn in the other. These are both activities, so the question is, if we choose to consider “activity” as the excuse for the tax in the one case, why not in the other?

    So, technically (technically vis-á-vis both English and reality, not technically vis-á-vis law, which is my main gripe!), it’s not the popcorn itself that’s being taxed; it’s the purchase transaction. Similarly, it’s not the ticket that’s being taxed; it’s the purchase transaction (in which one sells and the other buys the ticket). The only difference is that in the case of the popcorn, it’s the popcorn itself that’s the end “good,” whereas acquiring the ticket is not the END goal of purchasing it; that is merely an intermediate step; the END goal (or “good”) is to watch the show.

    When we say “this popcorn is taxed,” what we mean is not that the popcorn itself is taxed, but rather that the sale of it is taxed — although I daresay that relatively few of us have ever considered this issue. I know I never did, until now. :>)

    Now. As for rattling my chain, my fondest desire is to become part of an entrenched minority that has caused an EMP burst over the City of Radioactive Skunk Cabbage, as a result of which the citizens and other inmates have connected strongly and permanently with their Inner Libertarian. At the point the minority will be the majority, or the majority will be the minority, or perhaps I should just have a short snort or three and go to bed. 😉

  • I’m all for capitalism, but it has historically been a disaster when applied to schools.

    Mooloo, your position has no basis in historical reality.

  • Laird

    Mooloo, Perry beat me to it. In the US, anyway, the literacy rate was far higher before the government took over education than it is today.

    And, based on your post, I would posit that knowledge of history was higher then, too.

  • Mr Ed

    The State took over schooling from private hands long ago because fully private schooling is not possible with an even semi-modern economy. Someone has to teach the workers to read and write, but there’s no money in it.

    Mooloo, it seems that you’ve never heard iif Christ’s Hospital, a Royal school, but not a State school.

    https://en.m.wikipedia.org/wiki/Christ%27s_Hospital

    As the State grows, and interferes, costs rise and private incomes are not as great as they might otherwise be. Even if people struggle to afford education, we can’t afford the cost that come from State education.

  • Julie near Chicago

    Very interesting article, Perry. Thanks.

    It used to be fairly common in rural areas, or at least where I grew up, for older family members to teach the kids to read before they set foot in school formally.

    Also, in the hinterland (and up until post-WW-II America had a LOT of hinterland) parents might get together and all chip in to hire a single teacher for their kids. The teacher might get free room and board at the home of one of the families. A schoolhouse might be built for the purpose, or in some places I suppose a church hall or other hall might be used.

    And of course today home-schooling, as well as parents’ banding together to hire tutors on their own hook, is alive and well and, I hope, growing.

    Government is simply not needed to create a well-educated public; indeed, history indicates that overall it’s more of a drag. As soon as you start bossing people around, things are going to start going haywire. And as long as common “wisdom” is that the solution is to throw more money with more strings, more personnel, and more opportunities for lying and demagoguery at the problem, the more haywire they are going to get.

    According to me, anyway.

  • Julie near Chicago

    Ditto, Mr Ed. :>)

  • mojo

    Increase the price. But 4 times what they asked for, and keep 3/4 of it. “Handling charges. Overhead.”

  • Surellin

    I think Detroit’s problems go back to the 1967 riots. After that, anybody who could afford to (black and white) moved out of the city into the suburbs. Not necessarily at once, but it became a death spiral – fewer middle class people and businesses means less tax revenue, higher tax rates, which drive more people and businesses out of the city. It didn’t help, either, that the city of Detroit paid its employees union scale for the auto companies – which turned out badly for both the corporations and the city. And, as usual, the pensions were a mess – raiding the pension funds for 13 checks a year, while pushing responsibility for this recklessness forward to…now.