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Taxing internet ads could raise lots of money, but doubts persist

Elaine S. Povich, Stateline.org on

Published in Science & Technology News

Leading Maryland lawmakers seeking a way to help pay for a $4 billion, 10-year education plan came up with what they consider an innovative idea of where to get the cash: deep-pocketed internet companies.

The Democratic proposal would tax Facebook and Google for every ad the companies run on the computer screens of Maryland residents visiting their sites. If passed, the plan would make the Old Line State the first in the nation to raise revenue by taxing online advertising.

"Massive technology corporations have ballooned in size and influence over the last two decades," wrote Maryland Senate President Bill Ferguson, a Democrat, in an email to Stateline. "This legislation starts to make sure that these corporations pay their fair share in contributing to building our state's core educational institutions."

A Nebraska bill would sweep internet ads into overall sales tax. New York policymakers would take a different approach to the same goal: taxing internet companies on the personal information they collect from any state resident who visits their sites. Many other states may follow suit if they see a new source of money opening to pay for needed services.

Supporters of the bills say it's time for wealthy internet companies to pay a larger share of taxes, especially when companies are profiting off residents' time and private information. But opponents argue the measures are unfair, impractical and bad for the economy.

Massive amounts of money are at stake in the fights. Facebook and Google are expected to account for about half of the $385 billion global digital ad market in 2020, according to eMarketer, a firm that tracks digital advertising.

 

Facebook alone could make between $38 million and $76 million in a one-time sale of users' data, according to an estimate by Investopedia, a financial advice website.

Ulrik Boesen, a senior policy analyst at the Tax Foundation, which argues for lower, more broadly based taxes, said any internet advertising tax that targets only large entities is too narrow and that the burden should be more widely shared.

And bills that target data collection might turn out to be even worse, he argued, if states use definitions that are too loose.

"Almost all businesses would be in some way liable," he said, "because collecting phone numbers from your customers or having a loyalty program ... and using that to generate a profit could fall under the non-definition of data."

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