Ad blitz on digital tax was full of falsehoods
Everyone in Maryland who tuned into TV or radio, read newspapers or been on the internet recently likely saw the barrage of advertisements against the digital revenue tax.
Regardless of the blitz, the General Assembly overrode Gov. Larry Hogan’s veto to pass the first in the nation tax targeting digital media last week.
The major theme of the ads was that the new tax would cripple business recovery in Maryland, especially small business. How during a pandemic could the state even consider imposing a new tax on digital advertising? Just another attempt by Maryland Democrats to tank the local business environment!
Marylanders for Tax Fairness, a group including lobbyists representing major U.S. technology firms including Alphabet, Amazon, Facebook, Apple and Microsoft, registered as a lobbying group in October to fight the tax.
Digital advertising revenue is the mother lode for companies like Facebook and Google. The group sponsored much of the negative advertising, which focused on potential damage to small businesses and ignored the actual targets of the tax, e.g., Mark Zuckerberg.
Under the new law taxes are levied on businesses earning more than $100 million annually in digital advertising — a very high bar. Tax rates increase progressively so that companies like Google would pay the highest rates. No small business in Maryland is going to receive a “digital tax” bill at the end of the year.
The ads argue that the behemoth firms affected will pass costs on to businesses and consumers. Small businesses won’t be able to afford advertising they desperately need to re-build. These are lobbyists from the largest tech corporations in the world saying don’t tax us on our obscene profits gained by having virtual monopolies on digital media or we will drive people in Maryland out of business. So much for corporate responsibility.
The tax, serendipitously, would help deal with the K-shaped recovery. It targets a progressive tax on the very sector of the economy that has boomed during the pandemic while other sectors have been pummeled.
The advertisements also implied that because Maryland is the first state to pass such legislation, we are out-of-step with the world. They ignored that Maryland is not alone in seeking to enact a tax on digital advertising revenue. Indiana and Connecticut have digital advertising tax bills before their legislature this year.
France imposed a digital revenue tax in January. The United States has delayed enactment of retaliatory tariffs, i.e., 25% on goods from France wine, to evaluate taxes levied by other countries. So we are flirting with a trade war with France to protect Amazon’s profits that they paid zero taxes on in 2017 and 2018. Italy, Turkey and Austria have enacted similar digital revenue taxes.
Fundamentally, the tax is an effort to charge companies for our data, their advertising elixir. State (or national) governments are obvious agents to broker a deal for compensation for the use of their citizen’s data.
Pressure is building internationally for a reckoning of how to deal with the tremendous wealth accumulating in one sector, wealth built on leveraging user data to target advertising.
The U.S. Chamber of Commerce, the Internet Association and others are suing Maryland to block the implementation of the law. Given the vagueness in the Maryland law about how the tax would be levied and the complexity of enacting such a tax, it is unlikely to be enacted as passed.
Nevertheless, it is not some crazy idea of villainous people to tax the internet as the ad blitz would have you believe. Senator Ferguson, the legislative sponsor, credits Paul Romer — a Nobel laureate in Economics with the idea.