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The new law would levy a tax of between 2.5% and 10% on large companies that sell online ads, but critics worry those costs would be passed on to small businesses.
Stock Catalogue /Flickr
With a pair of votes, Maryland can now claim to be a pioneer: it's the first place in the country that will impose a tax on the sale of online ads.
The House of Delegates and Senate both voted this week to override Gov. Larry Hogan's veto of a bill passed last year to levy a tax on online ads. The tax will apply to the revenue companies like Facebook and Google make from selling digital ads, and will range from 2.5% to 10% per ad, depending on the value of the company selling the ad. (The tax would only apply to companies making more than $100 million a year.)
Proponents say the new tax is simply a reflection of where the economy has gone, and an attempt to have Maryland's tax code catch up to it. The tax is expected to draw in an estimated $250 million a year to help fund an ambitious decade-long overhaul of public education in the state that's expected to cost $4 billion a year in new spending by 2030. (Hogan also vetoed that bill, and the Democrat-led General Assembly also overrode him this week.)
But Hogan said it would raise operating costs for businesses because companies like Google and Facebook would simply pass the costs along to them. Earlier this week, Hogan used his political advocacy group Change Maryland to encourage Marylanders to call lawmakers and demand they sustain his veto.
In a statement on Friday, Marylanders For Tax Fairness, a coalition of businesses created to fight the tax, lambasted the General Assembly's override of Hogan's veto.
"In Senate President Bill Ferguson's short tenure as a leader, he has managed to do what no other Senate President has ever done — raise taxes and costs on Marylanders in the middle of a worldwide pandemic," said spokesman Doug Mayer, who once worked as an advisor to Hogan. "There is no doubt what took place today was a historic event, but not in the way President Ferguson hoped. This tax increase was historically shortsighted, foolish, and harmful to countless small businesses and employees, and Marylanders will remember it that way."
Reacting to the criticism that the tax would hit Maryland businesses, Ferguson introduced emergency legislation last week to prohibit Big Tech from simply passing along the costs of the new tax to local businesses. It would also exempt media companies from paying the tax; newspapers and broadcasters had complained of the possibility of one more cost while they are facing declining revenues.
Still, there remains the possibility of lawsuits to stop the tax from taking effect; Maryland Attorney General Brian Frosh warned last year that "there is some risk" that a court could strike down some provisions of the bill over constitutional concerns.
Maryland isn't alone in considering a new tax on online ads. D.C. lawmakers passed and quickly repealed their own tax last summer; proponents said it would help patch up holes in the pandemic-battered budget, but critics said it was rushed and poorly thought out. And it seems likely that more states could consider similar proposals in the future, if not for revenue, but also as a tool to rein in ever-growing social media companies. (European countries have been pushing ahead on a range of taxes on Big Tech.)
That point was made by Baltimore bookstore owner Benn Ray in an op-ed published earlier this week in Maryland Matters.
"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," he wrote.
"This legislation is about fairness, making sure those who reap enormous profits in our state help support public services here," Ray continued. "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."
This story is from DCist.com, the local news website of WAMU.