Tax Proposed for Blank Computer Disks

Aug 7, 2000

BY EDWARD JEFFRIES
FPI


WASHINGTON, DC - Flanked by music and movie industry representatives, Senator Diane Feinstein (D-California) today introduced legislation intended to address the growing problem of piracy on the Internet. The proposed law would levy a tax on blank digital media intended to offset industry losses to illegal copying of music, movies, and computer software.

"Billions of dollars are lost every year to piracy," said the Senator during a press conference held on the Capitol steps. "Millions of artists the world over are having their work stolen from them at literally the speed of light. The legislation I have proposed will restore balance, protect copyrights, and ensure artists are rewarded for their work."

Sharing the steps with Senator Feinstein were Jack Valenti, president of the Motion Picture Association of America (MPAA), and Hillary Rosen, president of the Recording Industry Association of America (RIAA). Both expressed enthusiastic support for the Senator's proposal.

"The problem of wholesale theft of music over the Internet is epidemic, and threatens the livelihoods of our members," said Rosen. "Napster is just one instance of a problem that has grown to the point where it is impossible for us to address every violation. This new law will help us ensure that new music will continue to be produced and made available to the public."

Valenti also weighed in favor of the Senator's Bill. "Because of their larger size, movie piracy over the Internet is only just beginning to be a problem for us. Advancing technologies like DSL and DivX compression will cause the situation to deteriorate rapidly unless something is done." Valenti added, "I think the Senator's approach is quite fair and workable."

Civil libertarians, largely blindsided by the news, were quick to denounce it. "This proposal assumes criminal intent on the part of every American, that the only reason they're buying blank disks is to make unsanctioned copies," said Presidential candidate and long-time consumer advocate Ralph Nader. "It's insulting."

Brad Templeton, president of the Electronic Frontier Foundation (EFF), a civil liberties group focusing on policy surrounding computers and digital media, also blasted the move. "You can use a Xerox machine to copy a book, but no one has suggested a tax on blank paper," he said. "This is the DAT tax taken to an unjustifiable extreme."

However, it was the so-called DAT tax -- part of the 1992 Audio Home Recording Act -- that was cited as the basis of the new legislation. "The precedent has already been set, and the framework is already in place," said Rosen of the RIAA. "This new law simply closes the tax loophole by including all recordable digital media."

"It was the DAT tax that killed digital audio tape recorders in this country," said Templeton of the EFF. "They simply aren't sold here because the market for them was destroyed by the tax." Rosen, however, dismissed the claim: "DAT was an emerging technology, and failed for reasons completely unrelated to the [Home Recording] Act. This new law applies to existing, well-established technologies. The demand for hard disks will not be affected by this legislation."

Computer disk makers, however, weren't so sure. None were willing to comment on record, as they haven't had a chance to review the proposal and its potential impact. However, a spokesperson for IOmega, makers of the ZIP and JAZ format disks, said, "At first glance, this does not appear to be a positive development for our company or our customers."

The proposed law would establish a variable tax rate on blank digital media based on three factors: Its size, its speed, and its portability. Floppy disks, although highly portable, are too small and too slow to carry significant amounts of infringing material, and so under the current proposal would remain untaxed. Hard disk drives are very large and very fast, but tedious to move around, so the tax would be moderate; the proposed rate is $2.50 per gigabyte. Finally, large capacity removable media -- such as ZIP, JAZ, or ORB disks; or blank CD-ROMs -- are large, fast, and highly portable, and are slated to receive the highest proposed tax rate of $6.45 per gigabyte. A gigabyte is roughly one billion characters; a full-length movie requires approximately four gigabytes of storage.

"The tax formula is generic, based on objective, measurable characteristics of the medium," Senator Feinstein said, "so future technology is automatically covered."

Taxes collected under the proposed law would be paid to the music, movie, and software industries, divided according to piracy loss estimates for that year. In the event collected taxes exceed piracy estimates, the excess would be put toward public awareness campaigns discouraging illegal copying.

When asked, the Senator revealed there were no provisions for the tax to be reduced in the face of advancing, cheaper technology. "Although the hardware may be cheaper, the data on it is no less valuable," she said. "It's industry losses to stolen data that we're trying to address here." When an observer pointed out that Microsoft Windows gets bigger with every release, the Senator's position seemed to soften. "I suppose we could look into it," she added.

Although no software industry representatives were on hand at the press conference, a spokesperson for Microsoft during a phone interview expressed support for the proposal. "If there's a hard disk out there, it's probably got Windows on it," said Woodrow Fries for the software giant. "Microsoft suffers heavily from software piracy, so we're pleased to see this proposal go forward."

Senator Feinstein is seeking re-election this year in California.


This is a work of fiction. Any similarities between events or persons depicted above and actual events or persons are entirely coincidental.

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