On Tuesday (October 15) the Taxpayers Protection Alliance (TPA) submitted an amicus curiae brief to the Supreme Court in support of Wages and White Lion Investments, L.L.C., challenging the Food and Drug Administration’s (FDA) regulation of e-cigarettes under the Family Smoking Prevention and Tobacco Control Act (TCA). TPA argues that the FDA’s actions have been arbitrary, capricious, and detrimental to public health. The brief contends that the TCA’s standard for determining what is “appropriate for the protection of the public health” is unconstitutionally vague, providing insufficient guidance to regulated entities and delegating excessive authority to the FDA. This vagueness has led to unpredictable enforcement, adversely affecting both taxpayers and adults who smoke and are seeking safer alternatives to conventional cigarettes. Furthermore, TPA criticizes the FDA for failing to recognize the significant benefits of e-cigarettes as a smoking cessation tool, as acknowledged by leading health organizations such as Public Health England. The TCA is at least clear on the need for the FDA to consider the impact of e-cigarettes on smoking cessation, yet the agency has abjectly failed to undertake this analysis. TPA highlights the FDA’s stringent regulatory approach and high denial rates for new e-cigarette products, which stifle market diversity and limit consumer choice, particularly harming adults who smoke and who might benefit from less harmful alternatives. TPA also notes the FDA’s disregard for market realities and consumer preferences, particularly the benefits of open-system e-cigarettes that allow for customization and have been shown to be more effective for quitting smoking. TPA urged the Supreme Court to uphold the Fifth Circuit’s decision, affirming that the FDA’s regulatory approach under the TCA is arbitrary and capricious and violates due process. TPA calls for a regulatory framework that adequately considers the benefits of e-cigarettes and gives regulated parties fair notice of how their products will be evaluated.
Big Tech is a Big Help in Disasters
These past weeks have been a traumatic and frightening time for those who have had to endure the destruction left behind by Hurricanes Helene and Milton. Many of those living in the areas affected by these storms saw their entire lives upended in a matter of minutes. One of the biggest challenges in the wake of a natural disaster is communication. Those in affected areas are constantly scrambling to reach out to loved ones, send requests for medicines or supplies, or inform others about potential hazards or road closures. In some cases, hurricane victims have resorted to tools such as radios to reach out to each other. But these tools require prior preparation or some level of technical expertise that might not be easy to scale up. Fortunately, those victims also have access to an increasing portfolio of alternative tools, such as satellite-powered phone or internet services. Owners of smartphones such as the Google Pixel 9 or the iPhone 14 (and subsequent versions) have access to satellite-powered calling and texting. This provides an easily scalable solution for potential victims who need to contact emergency services when vital infrastructure, such as cell towers, is compromised. Additionally, satellite internet company Starlink has waived subscription fees for new and existing customers in affected areas. Project Kuiper (which also provides global satellite broadband) shows the development of a competitive satellite internet industry that is providing victims with a reliable internet connection in the immediate aftermath of the disaster, something impossible to think of a decade ago. It is easy to take technologies that offer services that have become routine for granted. But in these emergency situations, these technologies prove to be life-savers for those in the danger zones. For example, during hurricane season, consumers can access their phones’ app stores and find multiple weather-tracking apps that give them real-time updates on the strength and trajectory of a hurricane or storm. They can do so with relative ease due to the app stores’ app distribution and vetting systems that reassure consumers that these apps do not contain any malware or have shoddy data privacy practices. Data-driven advertising can also make the discovery of these apps or other useful goods easier for users. Social media users located in potentially affected areas can receive location-based advertisements that promote weather-tracking apps or stores that offer valuable goods and services, such as plywood or the help of water damage contractors. This can point users to small businesses or stores they could have not seen otherwise, which are critical in a situation where these products are scarce.
Unfortunately, a lot of these innovations are either rolling out slowly or are being actively attacked by policymakers. As some have noted, the Biden administration’s approach to getting America connected has left low Earth orbit satellite services lagging behind, slowing down their deployment. Various bills and antitrust efforts aimed at app stores could seriously compromise users’ ability to avoid fraudulent or malware-ridden apps. Congress has also continuously pushed bills that would severely impair or ban targeted advertising, which could reduce the number of free ad-supported services on which some of these users rely. Providing logistical support has also been improved by technology. For example, Amazon received an urgent request from the North Carolina Department of Public Safety for baby formula. Within 15 hours of that request, more than 19,500 ounces of baby formula were delivered to the Joint Force Headquarters in Raleigh, North Carolina, where the state’s National Guard expedited the shipment into Asheville, North Carolina, because many food banks and supply stores had been destroyed by Helene. While it is always good to “buy locally,” the economies of scale and delivery networks needed to respond to a natural disaster can only be provided by logistical leaders such as Amazon.
While hyperregulation and antitrust lawsuits against technology companies may be fashionable for Republican and Democratic populists, breaking up these companies or stifling their creativity may cause more damage than good.
Consultants and lobbyists are helping California cities raise your streaming prices
First it was broadband consultants lining their pockets and trying to make more miserable for taxpayers and consumers. Now, cities across California, from Sacramento to Santa Barbara to Glendale, have been paying consultants and a lobbying firm to figure out ways to raise taxes on their residents who use video streaming and conferencing services like Hulu, Netflix, or Zoom. Avenu Insights, which uses the benign moniker “revenue enhancement” in place of tax increases, has raked in millions of dollars advising cities on how to apply legacy utility user taxes (UUTs) — meant for cable television, water, and electricity—to online services. Your tax dollars at work—paying consultants and lobbyists to help raise your taxes. Avenu Insights sells an appealing narrative to cities. Local governments are “losing” revenue as residents cut the cord and use Internet-based streaming and communication services in place of cable television or the copper telephone network. The firm helps cities “recover” that revenue by simply changing the definition of “utility” to include everything from Netflix to Microsoft Teams. For example, Santa Barbara simply declared ESPN+ a utility and voila—it cost residents nearly 6% more per month. Disney has sued the city and the case is ongoing. While California law requires cities in the Golden State to get voter approval to raise residents’ taxes, Avenu Insights argues that applying legacy taxes to new services is an end run to that required voter approval. Cities can simply raise the price of popular services overnight through definitional fiat. For the moment, let’s set aside that the regressive nature of raising taxes on streaming services used by 99% of Americans will fall hardest on low-income Californians.
The purpose of UUTs is for cities to recover the costs they incur by maintaining the rights of way used by cable TV or gas and electric lines. When residents watch a Netflix show or FaceTime their relatives, they’re not straining city resources. These services are delivered over mixed-use infrastructure like cable and phone lines or wireless towers and satellites. Moreover, since residents are often accessing these streaming services outside their physical residences via the Internet, it makes little sense for the UUTs to be used to reimburse for the use of these non-existent city resources. Even if broadband Internet were a “utility,” a topic of much dispute, the federal Internet Tax Freedom Act bans state and local governments from taxing broadband or certain “online activity” to prevent price increases that might depress Internet adoption. At best, applying local UUTs to video streaming violates the spirit, if not the letter, of that law, and courts have generally held that applying cable franchise fees to platforms that don’t use city facilities is illegal.
Moreover, California residents are already struggling. The Golden State boasts the nation’s highest sales tax, highest gas prices, and a cost of living second only to Hawaii. The last thing Californians need is their local governments raising their Netflix price. In a recent webinar, Avenu Insights advised cities to “capture all forms of telecommunication,” including video conferencing and streaming video. “Streaming in particular is a significant source of potential revenue,” said Ben Ray, a partner with JarvisFay, while lamenting that the “streaming industry is trying to resist this.” He also warned of the “bubbling” issue of “taxing bundled video services,” noting potential complications with taxes on Amazon Prime video or Microsoft Teams, platforms that are bundled with other services like two-day shipping and word processing. No doubt Avenu Insights can help cities navigate those complications and grab some revenue, and the firm has every incentive to do so. A contract between Avenu Insights and the city of Sacramento, revealed through a public records request, shows that the firm not only gets paid a consulting fee, but gets a 20% cut of any revenue the city obtains through “audits” of “utility providers.” In other words, if cities suddenly decide that streaming services like Hulu are “utilities” that are tax delinquent, Avenu gets a nice chunk of those back taxes. At minimum, cities should be transparent about what they’re doing and who they’re paying. If voters knew their tax dollars were being used to pay lobbyists and consultants to help cities impose Internet taxes while giving those consultants a kickback of the audit revenue, they might not be so supportive. If cities are trying to avoid the sunlight when it comes to UUTs, then they’re probably up to no good.
BLOGS:
Wednesday: TPA Files Brief Supporting Fifth Circuit’s Ruling Against FDA’s Vaping Regulations
Thursday: TPA Slams Sen. Elizabeth Warren’s Over Calls to “Break Up” Citibank
Friday: The free market is America’s first line of defense in the wake of disaster
Media:
October 11, 2024: I appeared on 55WKRC (Cincinnati, Ohio) to talk about improper payments, IRS abuse, and taxpayer-funded broadband networks.
October 11, 2024: Issues & Insights ran TPA’s op-ed, “Outdated Transplant Laws Claim Thousands of Lives.”
October 13, 2024: WBFF Fox45 (Baltimore, Md.) interviewed me for their story on Maryland Department of Transportation executives’ steep salary increases.
October 13, 2024: Florida Daily (Fleming Island, Fla.) ran TPA’s op-ed, “Euro-Regulation Could Fry Floridians’ Phones.”
October 14, 2024: WBFF Fox45 (Baltimore, Md.) interviewed me for their story on Maryland’s proposal to tax vacant properties at a higher rate than occupied ones.
October 14, 2024: The Washington Examiner (Washington, D.C.) ran TPA’s op-ed, “The free market is America’s first line of defense in the wake of disaster.”
October 15, 2024: RealClear Markets ran TPA’s op-ed, “Markets Are U.S.'s First Line of Defense Against Disaster.”
October 15, 2024: The San Gabriel Valley Tribune (West Covina, Calif.) ran TPA’s op-ed, “Consultants and lobbyists are helping California cities raise your streaming prices.”
October 15, 2024: The Riverside Press Enterprise (Riverside, Calif.) ran TPA’s op-ed, “Consultants and lobbyists are helping California cities raise your streaming prices.”
October 15, 2024: The Redlands Daily Facts (Redlands, Calif.) ran TPA’s op-ed, “Consultants and lobbyists are helping California cities raise your streaming prices.”
October 15, 2024: The Daily Bulletin (Ontario, Calif.) ran TPA’s op-ed, “Consultants and lobbyists are helping California cities raise your streaming prices.”
October 15, 2024: The Daily Breeze (Hermosa Beach, Calif.) ran TPA’s op-ed, “Consultants and lobbyists are helping California cities raise your streaming prices.”
October 15, 2024: The Los Angeles Daily News (Woodland Hills, Calif.) ran TPA’s op-ed, “Consultants and lobbyists are helping California cities raise your streaming prices.”
October 15, 2024: The Whittier Daily News (Monrovia, Calif.) ran TPA’s op-ed, “Consultants and lobbyists are helping California cities raise your streaming prices.”
October 15, 2024: The San Bernardino County Sun (San Bernardino, Calif.) ran TPA’s op-ed, “Consultants and lobbyists are helping California cities raise your streaming prices.”
October 15, 2024: The Orange County Register (Irvine, Calif.) ran TPA’s op-ed, “Consultants and lobbyists are helping California cities raise your streaming prices.”
October 15, 2024: The Pasadena Star-News (Pasadena, Calif.) ran TPA’s op-ed, “Consultants and lobbyists are helping California cities raise your streaming prices.”
October 15, 2024: NewsMax ran TPA’s op-ed, “Sin Taxes Never Improve Public Health.”
October 17, 2024: The Reading Eagle (Reading, Pa.) mentioned TPA in their op-ed, “Beware of consultants promising broadband.”
October 17, 2024: WBOB Salem Radio Network (Jacksonville, FL) interviewed me for their story on tariffs, the economy, and tax policies.
October 17, 2024: WBFF Fox45 (Baltimore, MD) interviewed me for their story on Mayor Scott expanding his communications’ team.
October 17, 2024: RealClear Markets ran TPA’s op-ed, “Why Are Conservatives Handing Parental Choices to Government?”
Have a great weekend!
Best,
David Williams
President
Taxpayers Protection Alliance
1101 14th Street, NW
Suite 500
Washington, D.C. xxxxxx
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