A Progressive Media Tax

Chris Hughes, a co-founder of Facebook, said the government must hold the social networking giant accountable and break it up. European lawmakers argue that Google has become a monopoly that is stifling competition. Twitter has repeatedly purged a number of conservative accounts for allegedly violating “terms of service,” while liberal accounts which are doing the same (or worse) go unchecked. What, if anything, can be done about the social media giants?

Paul Romer, who won the Nobel Prize in Economics in 2018, has proposed a tax on targeted digital ads. This tax would apply to revenues (not profits), and would be “progressive” (which means the tax rate would increase as revenues got larger). To use Twitter as an example and a simple tax of 1% more on each additional billion in ad revenues, Twitter’s $3B revenues would generate:

• $0 for the first billion
• $10M for the next billion
• $20M for the third billion

This progressive media tax makes sense to me for a number of reasons. First, the very existence of the big social media companies is due to an extraordinary privilege granted by Congress in section 230 of the Communications Decency Act. 42 USC § 230(c)(2)(A) shields social media companies from liability for “any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected.” This gives social media an explicit right to censor private speech.

What Congress gives, however, Congress may take away. When the big social media companies silence political speech that they don’t like, they lose their claim to the special privileges and immunities conferred by statute. 47 USC § 230(a)(3) states that the Internet and other interactive computer services “offer a forum for a true diversity of political discourse.”

A “Progressive Media Tax” would have the following components:

• It would apply to all corporations that sell targeted digital ads which elect to operate under the protection of 42 USC § 230. Corporations could avoid the tax by electing not to claim that protection, or reduce it by shifting from “freemium” services (funded by ads) to “premium” ad free packages.
• The tax would apply to all targeted ad revenue generated from shared data, whether that data is owned by the corporation or is shared with others. For example, Facebook owns Instagram, WhatsApp, and several dozen other services. Facebook could spin these services off yet continue to share data with them. Under the proposed law, the tax would be computed on the total revenue of all ads generated by the data set. regardless of the owner; individual corporations would then pay their share of the total tax.
• The tax rate would be set to promote competition and reduce corporate threats to individual privacy, not to maximize revenue.

A Progressive Media Tax is easy to impose, possible to administer, and directly addresses the new challenges of our 21st Century media.

Congress will not enact a progressive media tax in the next two years, but the next eighteen months may be critical. Social media is so powerful that it has the potential to tilt American politics. If Facebook, Twitter, and Google realize that Americans want to limit their power, they may use their power to make sure that cannot happen by “hacking” the 2020 election.

Economist Paul Romer suggests that state legislatures lead the way. With some minor modifications, state may impose a progressive media tax. If you would like to promote such legislation in your state, leave a comment or contact the author on Twitter (@GreenNukeDeal).