EDITORIAL: Special-Interest Tax Exemption Bills Sought by Newspapers

Tuesday, June 17, 1997

Page 8

EDITORIAL
Special-Interest Tax Exemption Bills Sought by Newspapers Should Be Defeated

Six years ago, over loud hollering of the newspaper industry, the state added a tax on sales of newspapers. Standing alone among the state's newspapers, Metropolitan News Company publications supported that measure.

A concerted effort is now being put forth by the newspaper industry and its professional association, the California Newspaper Publishers Assn., to repeal the tax and reinstate the law as it existed prior to July 15, 1991. We believe their effort is ill-considered. If any other industry were seeking special-interest legislation to exempt sales of its product from a tax paid on other merchandise, the cries of newspaper editorials would be decidedly against according such favored treatment.

In support of the measures, AB 1608 and SB 1300, one newspaper, The Signal, proclaimed in an editorial:

"In addition to the fairness issue is the unsavory policy of taxing information. In a society that prides itself on the free exchange of ideas and a press that is generally unhindered by government interference, a tax on newspapers leaves a foul taste."

Information is not being taxed. Sales of a tangible product, produced by money-making enterprises, are taxed.

If a sales tax is "government interference," then so is any other tax imposed on newspapers. Can it be argued seriously that the Times Mirror Corporation, for example, should be spared any taxation on its income? Freedom of the press does not connote a freedom from the financial burdens imposed generally on commercial endeavors.

Another editorial, that of the Contra Costa Times, notes that other sales tax exemptions removed in 1991, at a time of a state fiscal crisis, have been restored, including exemptions for free newspapers and most weekly newspapers. It argues:

"The law was unreasonable to begin with. When one considers the repeals that have occurred, now it is clearly even more so.

"Since the state is virtually rolling in money again, there is no reason to keep this nuisance law on the books."

Whether other exemptions have or have not been removed, and the condition of California's finances, have nothing to do with whether or not there is a solid rationale for sparing daily newspapers from an obligation imposed on other sellers of products. If there is no such rationale (and we have heard none that makes sense to us), the tax should remain.

We see no problem with the reinstatement in late 1991 of an exemption for newspapers of non-profit groups, nor with the 1992 restoration of an exemption for free newspapers (since there is no sale). We do fault the 1992 re-enactment of an exemption for newspapers sold by subscription (which, under a Board of Equalization regulation, covers most weekly newspapers). Rather than eliminating the tax on sales of daily newspapers on the ground that it is inequitable to tax them and not sales of weeklies, we suggest that all sales of all newspapers sold for profit be subject to taxation.

The San Diego Union comments:

"If the legislation ultimately passes, daily newspapers would be placed once again on a level playing field with other media-including...radio stations, television stations, cable operators, billboard companies and junk mail purveyors that compete for the same advertising revenues but are not subject to the 7 1/4 to 8 1/4 percent state sales tax."

The reasoning is superficial. Broadcasters, billboard companies and issuers of junk mail do not make sales to the public, hence there is no sale to tax. The headline on the editorial, "selective taxation," is a misstatement. If the state imposed a sales tax on some for-profit daily newspapers and not others, there would be an obvious equal protection infirmity. But placing a sales tax on one advertising medium which makes sales of products and not another advertising medium which does not make sales of products can hardly be called discriminatory. Under such reasoning as The Union puts forth, television and radio stations could not be confined to broadcasting on particular wavelengths because newspapers distributed by carriers are not relegated by the federal government to specified newspaper routes.

The Daily Breeze makes a similar argument, and includes the Internet in the list of "other forms of media" that do not pay a sales tax. Where an Internet-user accesses a site and pays no money to the proprietor of the site to do so, there obviously is no sale, and the comparison with newspapers is senseless. On the other hand, there are several sites which do charge for access to some or all of their features, such as the Los Angeles Times site which charges for access to its archives. In essence, there is a sale of data, and a legislative enactment to tax such sales might well be contemplated.

The Santa Barbara News Press also cries out against the tax because, it insists, it unfairly singles out daily newspapers. It also rails against "the debilitating effect of taxation on the public's right to be fully informed by the press" and warns that "people could lose an important means of reading and understanding what's happening around them."

Come now.

As of next month, the tax will have been in place for six years. During that time, newspapers have perished, but in no instance of which we know have the publishers attributed the demise to a dwindling number of readers who could afford the product in the light of the sales tax. The Santa Barbara News Press is still around, as is its owner, Times Mirror. The few cents added to the price in the form of a sales tax have not placed the cost of newspapers beyond the means of the reading public. A newspaper, the function of which is to ferret out truth and expose falsehood, should not resort to such deceptive rhetoric simply because it is doing so in an editorial relating to a matter involving self-interest.

The state should simply not be deprived of $50.9 million a year in revenues from taxes on sales of newspapers just because the newspapers are still pouting over losing an exemption in 1991 they never should have had.

We agree with The Signal that newspapers should be "generally unhindered by government interference." That's because newspapers have a job to do, a significant part of which is to act as a "watchdog" on government. But watchdogs, if they are to retain their vigilance and do their jobs, cannot have those in government petting them or giving them bones.

The legislative beneficence The Signal seeks would, in itself, constitute a form of "interference." To generate indebtedness on the part of newspapers to those whom the newspapers traditionally perform the role of scrutinizing is an interference with the objectivity and independence of those journalistic organs.

AB 1608 (carried by Curt Pringle, R-Garden Grove, and Lou Papan, D-Millbrae) and SB 1300 (sponsored by Charles Calderon, D-Montebello) are measures that would afford an immunity to certain profit-making companies from the general obligation of businesses of collecting and handing over sales taxes. It is in the public interest that revenues from these taxes not be shut off; and, moreover, that an attempt to lend favored tax treatment to a particular industry be thwarted. We urge the defeat of these bills.