Can you tax social media? Illinois faces legal questions over proposed law
Can you tax social media? A bill on Illinois Gov. J.B. Pritzker’s desk would do just that, but it’s getting some immediate pushback.
This proposal would essentially tax social media companies based on the number of users they have in the state. Some of the language in the tax also leaves a lot for interpretation.
“The details are tricky,” Adam Thierer, senior fellow at the R Street Institute, told Straight Arrow.
Social tax
One of the elements that remains the most unclear is what exactly is being taxed?
The language in the bill does not answer that question directly and is, frankly, confusing.
“It’s a pretty straightforward tax on speech, and a discriminatory one at that,” Thierer said. “It basically suggests that it’s alright for government to be singling out types of media or media platforms that it does not like and assessing special taxes accordingly.”
The state is facing a significant budget shortfall. It expects this tax to raise some $200 million for the state.
The plan involves having major social media companies pay a monthly, tiered fee based on the number of active users they have in the state.
However, it does not define what a “user” is.
Some social media websites, like Reddit, can be used without having an account, leaving it unclear whether those people would count as users.
Illinois Gov. JB Pritzker has been a big proponent of this tax, especially as his state faces more uncertainty over federal dollars coming in during the Trump administration.
“Those companies are profiting from online engagement of Illinois consumers, and they currently contribute nothing to ameliorate the negative effects of their platforms,” Pritzker told Capitol News Illinois.
There’s an identical tax already in place in Chicago as of December last year.
That tax charges social media companies with more than 100,000 users in the city 50 cents per user annually.
Pushback
That Chicago tax is already facing legal pushback from NetChoice, a tech industry trade group that advocates for internet and e-commerce companies.
Their members include major companies like Meta, Google and Snap Inc.
They’ve also written to Pritzker asking him to remove the language for this new statewide tax from the budget bill.
“This is something that raises some rather serious concerns under not only the First Amendment, but also just under principles of sound tax policy, in terms of apportioning taxes in a fair and non-discriminatory fashion,” Thierer said.
Regardless of whether the city or state could win a lawsuit challenging the tax, litigation costs money.
With the entire point of this tax being to raise more money, it could be a moot point if they end up having to shell out millions to defend the policies.
“There is the potential there for litigation costs to exceed the worth of this effort,” Thierer said.
What’s next?
The bill now sits on Pritzker’s desk, and he is expected to sign it.
If that happens and the social tax takes effect, companies will have a few options moving forward.
One of those could be to simply shut down their platform in the state and city. That’s unlikely, but it’s on the table.
“How far can government go before they force the hand of technology companies to basically just close down service in a state?” Thierer said.
The federal government has largely stayed away from national tech policies, allowing states to enact their own policies.
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Ella Rae Greene, Editor In Chief
