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The cure for what ails Silicon Valley? An online advertising tax

There’s been a massive transfer of wealth from media that produce journalism to those that don’t. The answer may well be a tax.

Timothy Karr
Timothy Karr
6 May 2019
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It’s time for Silicon Valley to pay up.

After more than a year of breaking news stories detailing the many missteps and abuses of companies like Facebook, Google and Twitter, regulators around the world are ready to pass new laws and take other measures to make these companies more accountable to the public interest.

Privacy, journalism and democracy advocates have issued warnings about Silicon Valley for years. Now government officials, the media and the broader public have awakened as well — and people are clamouring to do something about it.

But what exactly? The answer may be as inevitable as … well … taxes.

In February, Free Press published a report calling on the US Congress to tax the data-harvesting industry that drives much of the Silicon Valley’s economy. The proceeds from this tax would support local-news startups, sustain investigative projects and seed civic-engagement initiatives – the kinds of news and information that could counteract the type of misinformation that spreads like wildfire across social media.

There are similar efforts under way in Australia, Austria and the United Kingdom, which see a “digital services tax” as a means to support noncommercial journalism. In the US, presidential candidate Amy Klobuchar has joined the chorus, and floated the idea of taxing powerful tech companies that profit from the mass collection of user data. Other countries including Belgium, France, India, Italy, Japan, Malaysia, South Korea, Singapore and Spain are weighing similar schemes.

Eroding democracy

Taxing Silicon Valley’s ad industry makes sense. Behind this global realization is the acknowledgment that the platforms have devastated the global news economy. As social networks and search engines dominate more of the online marketplace, the independent and local journalism that people need to participate in democracy continues to disappear.

Between 2004 (the year Facebook launched) and 2016, the number of US newspaper employees dropped by more than half – from 375,000 to about 173,000, according to the Bureau of Labor Statistics. During that same time period, print-advertising revenue fell from a record high to a record low. Many large metro and regional papers closed shop.

According to eMarketer estimates, in 2019 US advertisers will spend more on digital advertising (US$129 billion) than on broadcast and print media outlets (US$109 billion) – the first time this has happened. A similar inversion of advertising revenue is happening in other countries as well.

Facebook and Google dominate this online advertising marketplace. Most of the other top earners, a list that includes Amazon, Microsoft, Twitter, Snapchat and Yelp, have nothing to do with news production. As a result, there’s been a massive transfer of wealth from media that produce journalism to those that don’t.

In the vortex of this we see the world’s wealthiest companies getting rich from a system that compromises user privacy while hastening the spread of propaganda and misinformation. And it’s happening at a time when the truth-seeking journalism we most need is in crisis.

Platform-tax

Our proposed platform-tax would help right this imbalance in the U.S. For example, a 2-percent ad tax on all online enterprises that earn more than $200 million in annual digital-ad revenues would yield more than $1.8 billion a year.

This money would be invested in a new and independent Public Interest Media Endowment that would hand out grants to a range of news-and-information projects, including local-news startups, investigative endeavors and civic-engagement initiatives.

Think of it like a carbon tax, which many countries impose on the oil industry to help clean up pollution. Countries should impose a similar mechanism on targeted advertising to counteract how the platforms amplify content that’s polluting our civic discourse.

Proceeds from taxing the ad-targeting economy behind Facebook and Google would help wipe away the mess they’ve made – and support the production and distribution of high-value content that places civic engagement and truth-seeking over misinformation and propaganda.

While we may not solve all of the problems surrounding platform privacy or journalism, a tax on online-advertising revenues is a winnable fight and achievable through legislation, passed by lawmakers in democracies across the world.

Silicon Valley giants have gotten off easy for far too long. It’s time we made them pay.

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