There was bipartisan willingness during a Monday Finance Committee hearing to consider taxing the enormous advertising profits of social media companies.
The legislature’s tax committee heard testimony on a bill proposed by Rep. Holly Cheeseman of East Lyme, the panel’s ranking Republican, to tax social media advertising revenues generated in Connecticut. The bill would require some of the tax revenue to be spent on efforts to prevent suicide and online bullying.
Cheeseman’s proposal is similar to bills under consideration in a handful of other states. Last month, Maryland’s state legislature overrode a veto by its governor to adopt an advertising tax on big tech companies.
The bill is aimed at “those larger, Facebooks, Googles of the world, who without a doubt have monetized Connecticut residents’ information and browsing habits for their benefit,” Cheeseman said during Monday’s hearing.
Her comments were directed at John Olsen, a representative from the Internet Association, a lobbying group for internet companies like Google, Facebook, and Amazon.
“Do you believe this should be done with no recompense to the state?” she said. “Surely it’s within a state’s rights to look at how do we best protect our residents and provide a revenue stream when, no doubt, you’re benefiting from it.”
Olsen maintained that Connecticut’s bill and Maryland’s new law are unconstitutional and violate a federal law that requires internet-based companies to be taxed in the same manner as their brick and mortar counterparts. Last month, the Internet Association filed a lawsuit contesting the Maryland law in federal court.
“If you’re only taxing one segment of an advertising industry simply by virtue of how that advertising is delivered, that’s clear discrimination. You’re only targeting certain platforms. You’re only targeting certain entities,” Olsen said Monday.
But there was resistance on both sides of the aisle to the idea that social media platforms were somehow pre-empted from paying state taxes on soaring revenues. Rep. Sean Scanlon, a Guilford Democrat who co-chairs the committee, said there was a “wide gulf” between what it costs a company like Google to create an advertising platform and the many billions in revenue the ads generate for the tech giant.
During the hearing, Cheeseman said her bill was “somewhat incongruous for a Republican,” but she said much of the laws governing internet companies were established before anyone had predicted their eventual influence and profitability.
“No one had any inkling of what the size of the market would be, the amount of revenue generated, the way residents’ browsing habits would be monetized by these large corporations,” she said.
Monday’s hearing saw the Republican lawmaker applauded by a state union leader. Connecticut AFL-CIO President Sal Luciano submitted testimony praising the bill. It was time for “Big Tech” to contribute to Connecticut’s tax base, he said.
“They profit from surveilling and collecting data from Connecticut users and then employing that data to target their advertisements,” Luciano said in written testimony.
During his testimony, Olsen warned an increase in costs to social media companies could be passed to smaller businesses who use the platforms to advertise. But he contended that the discussion was rooted in a bill that would not stand up to legal scrutiny.
“As far as the philosophical questions, yes, I’m happy to respond to them, but right now we have a bill that appears to be a clear violation of federal law,” he said.