Why Iowans may see higher Netflix, Uber and Amazon bills

Iowans would pay more to take an Uber across town, subscribe to Netflix or download a book or movie from Amazon under proposals making their way through the Iowa Legislature.

Tax reform proposals making their way through the Iowa House and Senate promise to cut hundreds of millions of dollars in taxes, putting more money back in the hands of Iowans.

But plans in both chambers also call for some new taxes on video streaming services, digital video rentals and ride share services.

The effect of adding Iowa's 6 percent sales tax to these "new economy" services wouldn't be massive: it would add $1.20 to a $20 Uber ride or an extra 66 cents on a $10.99-per-month Netflix subscription.

House Ways and Means Committee Chairman Rep. Guy Vander Linden said the changes are meant to provide consistency across the Iowa tax code.

"In general, the intent was to try to make the sales tax code match the modern economy," said Vander Linden, R-Oskaloosa. "What's the difference between downloading a movie and checking out a disc at a Redbox? We’re just trying to make everything as consistent as we can."

In addition to targeting streaming and rideshare services, the House plans calls for leveling the playing field between brick-and-mortar retailers and online marketplaces like Amazon and Ebay and adding the sales tax to taxi rides. The Iowa Department of Revenue expects the sales tax changes to bring in an additional $105.7 million per year by 2020.

Vander Linden said he doesn't like to raise any taxes, but views this issue as one of parity, not an outright tax hike.

"I understand it will affect some people that are not affected on those particular products right now," he said. "But I think it's a matter of being consistent about what kinds of things we tax."

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But Uber and taxis are still fighting the change.

A lobbyist representing Uber and two local Uber drivers testified last week against the sales tax expansion at the statehouse.

Mike Hugugin, who said he's been paid for more than 2,200 rides on the app, said Uber often caters to the disabled and poor. In one week, he took three single mothers in the Des Moines area to drop their children off at daycare and school before going on to work, he testified.

"If they are paying an extra amount of money on that, how long are they going to be able to do that?" he said. "...Those people cannot afford any more expenses."

Netflix officials did not respond to a request for comment.

Uber officials were unavailable for an interview, but a spokeswoman released a statement Friday objecting to the legislative proposal. She noted that Uber already pays a $5,000 annual fee to the Iowa Department of Transportation to operate here.

"This new bill would force Iowans to pay a tax on every trip they take and hurt the local men and women who rely on Uber to make extra income or get around town," the statement read. "We urge the Iowa legislature to keep ridesharing affordable and accessible to all by not passing this harmful tax on transportation services.”

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But the move appears to enjoy widespread support: Separate tax reform plans issued by Republican Gov. Kim Reynolds and House and Senate Republicans have included the new taxes on rideshare and video streaming services. On Thursday, Senate Republicans issued a new $2 billion tax cut plan, but it lacked specific details and has not yet been introduced as a bill.

Peter Fisher, research director at the left-leaning think tank Iowa Policy Project, said the changes will provide fairness in the tax code.

"I think it does make sense," he said. "Those kinds of services that have been made possible by new technologies are in most cases competing with traditional ways of providing those services, which have been collecting sales tax for a long time."

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He said the proposed measures seem to enjoy bipartisan support, particularly since it will help pay for larger tax cuts.

"It doesn’t seem controversial," Fisher said. "I doubt they would be proposing it if it weren’t in the context of those sales tax expansions being used to fund the income tax relief, which of course is what they want to advertise. It wouldn't happen by itself."

An analysis by the Iowa Fiscal Partnership shows that the proposed sales tax expansions will cost the poorest Iowa taxpayers about $16 more per year. The wealthiest taxpayers would see an annual increase of $224, according to the analysis.

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About half of all states already tax video streaming services, according to records kept by the National Conference of State Legislators.

But Iowa would join a small group of states that tax rideshare services.

Jackson Brainerd, a policy associate at the National Conference of State Legislatures, said nine states — Connecticut, Maryland, Massachusetts, Nevada, New York, Pennsylvania, Rhode Island, South Carolina and Wyoming — have moved to impose a tax or fee on rideshare services.