Maryland Politicians Pushing Tax on Online Ads
Politicians in Maryland are looking for new sources of revenue to prop up their spending programs. They think they’ve found a pot of gold through a tax on the revenues big tech companies earn from online advertising.
The problem is, the proposal is so vague, and so potentially so sweeping, it invites both confusion and lawsuits:
The Maryland tax, which applies to revenue from digital ads that are displayed inside the state, would be based on the ad sales a company generates. A company that makes at least $100 million a year in global revenue but no more than $1 billion a year would face a 2.5 percent tax on its ads. Companies that make more than $15 billion a year would pay a 10 percent tax. Facebook’s and Google’s global revenues far exceed $15 billion.
Bill Ferguson, a Baltimore Democrat who is president of the State Senate, was a main driver behind the bill. He said he was inspired by an Op-Ed essay from the economist Paul Romer proposing taxing targeted ads to encourage the companies to change their business models.
“This idea that one outsider can exploit and use the personal data of another area and pay nothing for its use, that doesn’t work in the long run,” Mr. Ferguson said.
So it’s not even a tax to raise revenue, but a tax that is supposed to “send a message.”
According to the Tax Foundation, the tax, regardless of its message, is a mess:
Not only is the tax of dubious legality, and not only is the burden likely to fall mostly if not wholly on those advertising into the state—many of which will be in-state businesses—but the structure of the tax is so poorly designed as to make it difficult to determine which transactions would be sourced to the state. The result could easily be double taxation. It would undoubtedly be considerable uncertainty—and litigation.
The costs of sending a message are high and confusing. But when a politician is bent on sending a message, those are features to be embraced, not bugs that would give a rational person second thoughts.
Image Credit: By Edi Wibowo [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0)], from Wikimedia Commons