Maryland Approves Country’s First Tax on Big Tech’s Ad Revenue

Maryland Approves Country’s First Tax on Big Tech’s Ad Revenue

State politicians battling the epidemic to budget gaps have made no secret about their interest in getting a bigger piece of the tech industry’s wealth.

Now, Maryland lawmakers are taking a new slice, with the country’s first tax on revenue from digital ads sold by companies such as Facebook, Google and Amazon.

The state Senate voted Friday to end the deputy commissioner’s veto, following in the footsteps of the state’s House of Delegates, which gave its approval on Thursday. With the money going to schools, a tax of about $ 250 million will be generated after the first year is enacted.

The approval signals the arrival in the United States of European policy leading policy, and is likely to set up fierce legal battles over how far communities can tax tech companies.

Other states are making similar efforts. For example, lawmakers in Connecticut and Indiana have already introduced bills to tax social media veterans. Several other states, such as West Virginia and New York, lacked the passing of new taxes on tech giants last year, but their proponents may renew their push after Maryland’s success.

The steps are part of a growing debate about the economic power of tech giants as companies have grown, have become gatekeepers of communications and culture and have started collecting data from their users. In the United States, law enforcement agencies brought a number of opposing cases against Google and Facebook last year. Members of Congress have proposed laws to check their market power, encourage them to make more careful speeches and protect the privacy of their users.

Maryland’s tax also reflects a confrontation of two economic trends during the epidemic: the largest tech companies have performed milestone financials as social distinctions advance work, sports, and commerce online. But cities and states saw them Tax revenue plat As their need for social services increased.

“They’re really squeezing,” said Ruth Mason, a professor at the University of Virginia’s law school. “And this is a very big way of targeting the winners of the epidemic.”

Lobbying groups from Silicon Valley companies such as Google and Facebook joined other opponents of the law – including Maryland Republicans, telecom companies and local media outlets – in arguing that the tax cost would be with ads and small businesses buying their customers Will be passed. Doug Meyer, a former aide to the government, Larry Hogan, who now heads a coalition backed by industry opponents of the tax, said at a news conference last week that supporters of the law “use this bill to swing outside the state Was doing.” , Large corporations.

“But they are swinging and missing and hitting their own components in the mouth,” he said.

The Maryland tax, which applies to revenue from digital advertisements that are displayed within the state, is based on the advertising sales the company produces. A company that earns at least $ 100 million per year in global revenue but more than $ 1 billion a year will not face a 2.5 percent tax on its ads. Companies that do more than $ 15 billion in business a year will have to pay 10 percent tax. Facebook and Google have global revenues of over $ 15 billion.

Bill Ferguson, a Baltimore Democrat who heads the state Senate, was a main driver behind the bill. He said he was inspired by An op-ed The essay by economist Paul Romer proposed taxing targeted advertisements to encourage companies to change their business models.

“The idea that an outsider can access and use personal data from another area and pay nothing for its use does not work for a long time,” Mr. Ferguson said.

Maryland’s Democratic-controlled legislature passed the tax last March with veto-proof prominence. But, Mr. Hogan, a moderate Republican, vetoed the measure in May.

“With our state in the midst of a global pandemic and an economic crash, and beginning on our road to recovery, it will now be unconscious to raise taxes and fees,” Mr. Hogan said In a letter Explaining his reasoning.

At the end of last year, industry groups helped create a lobbying organization to prevent Mr. Hogan’s veto from being overridden.

For months, the organization, Marylanders for Tax Fairness, backed by some of Silicon Valley’s top lobbying groups, has warned Spot MPs on cable news and local radio that a proposed tax on digital ads is a “bad idea” . Time.”

The coalition has highlighted stories of small businesses stating that they will eventually pay the new tax costs when they purchase online.

“A new $ 250 million tax during an epidemic,” said the dark-voiced narrator of an advertisement on a one-time video in Annapolis. “Tell Your Legislator: Stop Digital Advertising Tax.”

While some states have imposed sales tax for certain digital goods and services when they are purchased by customers, the Maryland tax is first applied to the revenue that a company receives from digital advertising in the United States, experts said. State lawmakers are expected to approve a second bill in the coming days to make it clear that the tax does not apply to media companies and that this expense cannot be passed directly to businesses purchasing advertisements , Although critics say the tax would still be higher for ads.

European policymakers have turned to digital taxes in recent years as a major regulatory push against American tech giants. France has levied a 3 percent tax on some digital revenue. Austria Income tax from digital advertising at 5 percent. European efforts were condemned by the Trump administration, which threatened to impose tariffs on French goods on the issue.

“I don’t think the issue is any different in Maryland than in California, India, France or Spain,” said State Senator James Rosape, a Democrat who is the vice chairman of the taxation committee. “Given that they are very profitable, they should pay tax.”

Maryland’s tax is likely to face court challenges.

Opponents may argue that because the largest tech companies are not based in Maryland, the law would allow tax activity arising outside the state to violate the Constitution. They may also argue that the law runs contrary to a federal law that states that taxes on digital goods or services should also apply to similar physical products.

“It’s tax discrimination,” said Dave Grimaldi, executive vice president of public policy at the online advertising trade group IAB. “There will be all kinds of challenges as soon as it is implemented.”

But proponents of the law said they believed they were on solid grounds to tax veterans.

“We expect that, even in overriding, it is likely that the industry will file a lawsuit,” Mr. Ferguson said. He said lawmakers have asked the state attorney general’s office whether it feels it can defend the law.

“And they did,” he said. “He signed.”



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