Opinion: Digital Ad Tax Holds Big Tech Accountable for Its Big Profits

In 2019, digital advertising became the largest segment of the U.S. ad industry, a $129 billion-and-growing force of commerce. This growth is built on us and our habits. Global companies driving this growth became behemoths through the harvesting and buying and selling of the minutiae of our lives.

Our neighborhoods, our friends, our shopping habits, our dietary and political preferences are all grist for the mills producing tempting and targeted banners that stream across our websites and clickable content on our social media feeds to sell us what we may or may not need, but definitely feel like we want. It can feel intrusive, like our ad feeds know us better than our families or even ourselves. And it should, because in some ways they do.

This information is worth a fortune to digital giants like Google, Facebook and Amazon. By one estimate, the data driving this flood of ads is worth $420 per person each year.

Beyond their infiltration into our daily lives, these big digital firms are further exploiting us by failing to pay taxes on this advertising, grabbing and monetizing our data without just compensation.

No state has yet harnessed the exploding online advertising sector or found ways to capture the value of the data our citizenry provides to these oversized advertising vehicles. But our data is absolutely essential to their success and undergirds their expansion, even as they extend further into the mobile phones in our pockets and the smart speakers in our kitchens — digging into us ever deeper, harvesting ever more of our data.

The Maryland General Assembly has seen this future and last year passed legislation to ensure that state residents get back some of the value of their data by imposing a reasonable tax on these digital giants.

State legislators will soon have the opportunity to override Gov. Larry Hogan’s veto of the measure to require large companies engaging in extensive digital advertising in the state to pay a tax, with proceeds designated for the Blueprint for Maryland’s Future to support our public schools. The measure, which was sponsored by Senate President Bill Ferguson, had strong backing from legislators last year. They should continue to stand for fairness and vote to override the veto.

Small, local businesses — like mine in Baltimore — would pay nothing under this bill. Indeed, any company making less than $100 million in global digital ad revenues – that is to say, the vast majority of all companies – would pay nothing. The giants who exceed that threshold would pay 2.5% or more on their in-state digital ad revenues, based on a sliding scale that reflects their reach.

The result? In its first year, this proposal could yield as much as $250 million or more for Maryland schools and other needs at a moment when national, state and local economies are reeling from a global pandemic. Consider the poetic justice: shortly after the coronavirus underscored the sharp digital divide in our society, this proposal would ensure big tech will help narrow that gap in Maryland.

As the owner of an independent bookstore with an accompanying bar, we have struggled merely to exist over the past year in this COVID environment. And while we’ve watched our sales fall in the face of shutdowns, capacity limitations and numerous other obstacles, the pandemic has had a profoundly positive impact on these global digital behemoths.

In vetoing this forward-looking measure, Gov. Hogan used his usual anti-tax rhetoric, bowing to pressure from business lobbyists. And now an astroturfing campaign is advocating against this reasonable proposal, using some Maryland small businesses as a fig leaf.

The campaign appears to be powered by the very digital giants who would have to pay their fair share in our state. The big tech firms are working hard to stop this bill, keep their profits sky high and cow other state legislatures, Congress and even other countries from holding their businesses accountable.

This legislation is about fairness, making sure those who reap enormous profits in our state help support public services here. It’s also about developing a tax code that keeps up with a changing economy. It’s about ensuring we recognize the value of our personal data – at least as much as corporations do. And it’s about ensuring that Marylanders – and not just large, global corporations – reap the benefits of the landmark economic changes happening around us.

Maryland legislators have taken an important first step in holding digital giants accountable for their outsized profits made on sales and our personal data. Let’s be forward thinking and establish a fair balance between business and privacy.

— BENN RAY

The writer is co-owner of Atomic Books in Baltimore. He can be reached at [email protected].