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The Sin Tax Threat

Posted On: 4/26/2013

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TAGS: Vending Times editorial, coin-op amusements, coin machine business, vending, jukebox, amusement arcade, video game, amusement operator, Marcus Webb, video game violence, video game regulation, sin tax, video game tax

Last year, after a deranged shooter committed mass murder at a movie theater in Aurora, CO, that town's mayor told reporters he was thinking about calling for a ban on violent videogames and maybe imposing sin taxes on them. In the wake of a violent tragedy, the kneejerk impulse to pass sin taxes and bans on controversial entertainment may be understandable. But lawmakers should know better.

This ongoing story carries important lessons for the entire music and games industry. In past decades, state Legislatures have banned and taxed pinball, arcades and various forms of redemption, among other amusement forms. They could do so again.

In Aurora, the mayor backed off after the city attorney explained that videogames are protected free speech. Bans and special taxes based on the content of media are a form of censorship, and therefore unconstitutional. It is surprising that the mayor needed such a lesson after the highly publicized 2011 decision to that effect by the U.S. Supreme Court. But need it he did.

The same kneejerk impulse is evident again this year in Connecticut and Missouri, where politicians have called for sin taxes on violent home videogames. (Connecticut lawmakers also want to ban shooting videogames in arcades.) Ignorance is not always the problem. Before these bills were submitted, somebody probably advised lawmakers in both states that their ideas are unconstitutional.

But state lawmakers often shrug off this kind of warning. They respond: "It's not my job to figure out what is constitutional and what is unconstitutional. That's the role of the courts. My job is to work for laws that I believe are in the best interests of my constituents."

Sorry, Mr. or Ms. Politician, but if lawmakers were serious about acting in their constituents' best interests, they would not pass such laws in the first place, knowing they will almost certainly provoke costly lawsuits -- which the state is almost certain to lose. Considering that a dozen states have already thrown away millions of dollars on ill-advised videogame bans (even before the 2011 Supreme Court decision), it is just plain dumb -- in fact, it is spectacularly dumb -- for officials to persist with this sort of thing. It is also financially irresponsible behavior in the extreme. The citizenry's best interests include not having their money squandered needlessly and deliberately.

When state lawmakers pass bans and sin taxes on free speech, they might as well have state Treasury Departments issue a giant stack of $100 bills, cart the money out to the front steps of the state capitol, arrange it in a nice pile and light the money on fire. That would get plenty of publicity, too. It would also save everyone a lot of time and trouble while accomplishing the same end: nothing but a waste of resources.

The fact is, however, uninformed and irresponsible lawmakers are going to keep passing dumb bills. The problem is that many of these dumb bills may be enforced for quite a while before they are struck down in court -- assuming they ever are. (Recent examples in Ohio, Maryland and Florida come to mind, where antigambling laws threatened legitimate redemption and amusements.)

William Shughart, an economics professor at Utah State University, has predicted that Connecticut lawmakers will go ahead and pass the proposed 10% sin tax on sales of violent home videogames.

If anti-game sin taxes are adopted, we can expect the same business interests and free-speech advocates who defeated videogame bans, will defeat sin taxes as well.

It doesn't take a legal genius to figure out where a sin tax on violent games can lead. Next would come sin taxes on movie studios and TV networks that feature violent programming. Then taxes on political content that politicians don't like (they've already managed to ban certain kinds of attack ads 60 days before an election).

This is the proverbial slippery slope, and we're starting down it.

What's the answer? Nothing you haven't heard before. Form a state association. If you already have one, support it. Build solid relationships with your state regulators. Educate them about the industry and your business.

Keep track of potential legislation that could hurt your local economic climate. Lobby for pro-business, pro-First Amendment policies before sin taxes and bans are proposed. Don't wait until a negative bill is in the hopper to start organizing and reaching out to your elected officials.

As AMOA's Jack Kelleher wrote recently, quoting a state association's lobbyist: "When you need a friend (in local government), it's too late to make one."