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Ohio Cable Subs May Duck 5 Percent Tax

Ohio consumers may be spared a 5 percent hike in their
cable-television rates under a legislative compromise that was being considered last week.

State lawmakers are hoping to place a ballot initiative
before voters in May that would help to fund education by raising the state sales tax by
up to a penny.

If the measure passes, the state's cable-television
operators would preserve their longtime exemption from Ohio's 5 percent sales tax.

'The issue of losing our waiver is not active right
now,' said Carol Caruso, executive director of the Ohio Cable Telecommunications
Association. 'But it's not over until its over.'

Faced with an education-funding crisis, Senate Democrats
wanted to expand the sales tax to cover cable television, satellite technologies and
management services. For cable, that would mean another $64 million per year in taxes --
an increase that would be passed through to 6.5 million Ohio cable subscribers.

Senate Republicans countered with a more industry-friendly
proposal that would ask voters to increase the sales tax by a penny.

Cable lobbyists argued that the Democratic proposal
amounted to double taxation, since operators already pay that much in franchise fees to
local municipalities.

Moreover, any sudden increase in monthly cable bills would
cause some consumers to disconnect their service, thereby reducing the amount of revenues
that the cities receive, they said.

'I think lawmakers finally realized that a sales tax
on cable would have been very unpopular, because it would have affected so many
people,' Caruso said.

The industry's position received a recent boost when a
survey conducted by the Cincinnati Enquirer and the University of Cincinnati
revealed that 62 percent of registered voters favored funding education through an
increase in the sales tax.

However, despite the compromise being floated, the industry
is not out of the woods.

While the Senate apparently has the votes to put a proposed
sales-tax increase on the ballot, it remains uncertain whether the votes are there in the
House of Representatives.

'If this [ballot initiative] plan fails, all bets are
off,' said Ed Kozelek, the OCTA's vice president of regulatory affairs.
'All kinds of scenarios are out there, then, including resurrecting the original

The Ohio Supreme Court precipitated the school-funding
crisis last March, when it ruled that using state property taxes to pay for education was
unconstitutional. It gave lawmakers one year to come up with a solution.