If there’s one thing Chicago politicians love to do, it’s finding new ways to tax its residents and what better way than a Netflix tax? Chicago mayor Rahm Emmanuel and the city have imposed a new amusement tax on streaming services like Netflix in order to close a gaping budget hole. As you can guess, this isn’t going over too well with some residents and they’re fighting back, in court. A group of Chicago residents have filed a challenge to the 9% tax rate on amusements in Cook County state court and the city aims to fight it “vigorously.”
In a claim that may have national significance, the lawsuit also says the Chicago streaming tax violates the federal Internet Tax Freedom Act, which forbids states and cities from imposing discriminatory internet-only taxes. Specifically, the Chicago subscribers claim the tax is illegal because it treats streaming differently from DVD-by-mail services and also imposes a higher rate than various live forms of entertainment.
Many cities, Chicago included, are fighting to regain tax dollars lost to online services and amusements that would otherwise go into local activities. There are two sides to every argument and it’s easy to see where the city is going with this new tax and why. But there are also valid arguments on the users side and that’s where the courts will have to decide who’s argument holds more weight. It will be interesting to see where this goes and how other cities react and tax online services and amusements. You can read the entire Netflix tax complaint filed by the Chicago residents below.