The enemy of my enemy is my friend. That’s an old phrase that potentially could be taking on a new meaning in the battle between traditional and digital media. Digital media, specifically Facebook, Google and Amazon are facing a new enemy that has the potential to hurt, maybe even devastate traditional media. So perhaps is it time for traditional media to unite and support their enemy against a common opponent. In this case, the common opponent is taxation and the state of Maryland.
Earlier this month, the Maryland state legislature overturned a governor’s veto and placed a tax on digital advertising revenue. In an article published by The Hill, Maryland Senate President Bill Ferguson said this new revenue stream would make sure “big tech pays their fair share while making billions of dollars a year using our personal data to sell digital ads.”
Maryland’s law targets companies that make over $100,000,000 a year only from digital advertising. Estimates suggest the tax will bring in $250,000,000 to state coffers in the first year, with the funds designated to help with schools. Other states are watching Maryland, ready to line up and sock it to the big three, including Connecticut and Indiana. West Virginia and New York had failed attempts at taxing the tech giants in the recent past, but will no doubt be looking at the opportunity again if possible.
As strange as it may sound, traditional media should show support to Google, Facebook and Amazon and fight this tax. Very true that the big three tech firms are big time enemies of the old big three - radio, TV and newspaper. But in this case as I said before, the enemy of my enemy is my friend. A tax on advertising, any advertising, is an enemy of all traditional media outlets.
Maryland’s law focuses very specifically on companies making over $100 million from digital advertising. Today. As a big believer in government’s ability to incrementally take away freedoms and rights, my concern for traditional media is that while the tax starts with those three companies it will quickly expand - maybe to all digital advertising, then eventually to all advertising. Sounds like I’m crying before I’m hurt, right?
Take a closer look at the fight newspapers have been embattled in to maintain legal notices in print. Legal notices appear in newspapers across the country telling of the dealings of government budgets, zoning boards and more. They are a great source of information for the public to see, seeing the good and bad of how your government works. It is also a nice revenue line for local newspapers.
For the past several years, newspapers have been fighting with state legislatures across the country to keep those ads in print instead of going to all online. Those small legal ads are a steady and major source of revenue. There are newspapers that are in existence today only because of the revenue from these ads. However, legislatures across the country have slowly been chipping away on legal notices, trying to eliminate them or take them to government run websites to eliminate the expense. And as an added bonus, placing the ads on a rarely read government website means less people will see them, causing less headaches for bureaucrats running our government.
Lawmakers have incrementally changed requirements for publishing legal ads here and there over the years, slowly but surely working towards the goal of completely taking away legal notices from newspapers. Going on right now in the state of Indiana where I live, there are a couple bills being debated to once again reduce or eliminate the ads and save tax payer dollars. I have no doubt that this same tactic will be used by lawmakers with online advertising, as they continue to look for revenue opportunities for their budgets, making incremental changes and eventually all advertising will be taxed no matter the source.
Local and state governments have taken it tough in the past year due to the pandemic. And unlike the federal government, they don’t have the ability to print more money, so the search for new taxing opportunities is understandable. Trying to improve education, as is the plan for Maryland is a noble cause to invest in. However, media companies should draw a hardline and stand against all taxation of advertising. And that could be an uncomfortable position - showing support for your sworn enemy like Google, Amazon and Facebook, and standing against a tax that will help fund education. But if allowed, governments will eventually come after all advertising revenue for taxation. With the cost of traditional advertising going down, not up, adding a tax on traditional broadcast time or newspaper space will erode the rates even faster, and could have a devastating impact on local media.
The U.S. Chamber of Commerce and the Internet Association are a part of a broad coalition of support for Facebook, Google and Amazon. In addition to those entities standing firm against this tax, I would urge the local press associations in Maryland, specifically The Maryland-Delaware-DC Press Association and The Maryland, DC, Delaware Broadcasters Association to join in support of defeating this tax. As tough a pill as it might be to swallow, supporting these online companies that have taken millions of dollars in advertising revenue from their membership will be in fact beneficial in the long run to those same members.
Not a surprising move at all, lobbying groups supported by Facebook, Google and Amazon have already filed suit against the state of Maryland over this tax. Their goal is to stop this new tax, and to stop the piling on of other local governments in Maryland, which could enact their own taxes on the tech firms. The opponents of the tax are calling it unfair because of how specific the law targets, unconstitutional and incompatible with federal laws. Those federal laws prohibit state lawmakers from instituting taxes specifically targeting online services.
Taxing any advertising will impact traditional media. Many traditional media outlets also offer agency style service, reselling and helping to manage Facebook and Google accounts. Recently as a media buyer, I’ve purchased from a traditional media outlet Amazon inventory. I’m sure there are digital advertising agencies in the state of Maryland, and they would be unfairly impacted by this tax, which would require them to have a higher cost of doing business than a similar company working across the boarder in Virginia, Pennsylvania or elsewhere. This Maryland law will have immediate impacts on those companies.
It also raises expenses on businesses throughout the state of Maryland who choose to advertise with these companies. Anyone who believes that the tax levied by the state is going to come from the profits of these firms is living in a fantasy world. The big three will still make the same money they were making from advertising Maryland businesses. They will simply pass along the expense to the Maryland companies placing the ads. This is an unfair tax on businesses in Maryland, who will shoulder the brunt of this expense. And they will in turn pass it along to consumers in Maryland. Ferguson’s suggestion that this tax would be the way big tech “pays their fair share” is a joke.
Comments