Who should pay? Taxing tech companies can solve the local news crisis they contributed to.


It is totally fair and appropriate to ask the biggest technology companies to play an extra role in solving this crisis. These companies are the big winners of the digital revolution.   

How big?

Alphabet (which, remember, owns not only Google but YouTube), Meta (which is Facebook plus Instagram) and Amazon together in 2023 took in roughly $1 trillion in revenue. That's more than Proctor and Gamble, Lockheed Martin, Eli Lilly, McDonald's, ATT, Coca-Cola, Citigroup,  Morgan Stanley, Nike and Netflix — combined. Times two! They earned $240 billion in EBITDA (profit), which is more than Walmart, Verizon, Exxon, Walt Disney and PepsiCo combined — times three!

Having Alphabet, Meta and Amazon help solve this crisis would force them to reduce their profits from $240 billion all the way down to $239 billion. The idea that this fee will be a big burden on those companies or need to be passed on to small businesses is unpersuasive. 

The main reason local news declined so much is that the business model broke. That happened not primarily because readers abandoned local news but because advertisers did. Where have they mostly gone? Google, Facebook, Amazon and other tech companies.

Part of why their ad business is booming is that they collect consumers’ personal information and use that to provide precise targeting for their advertising products. Advertisers can now target consumers wherever they are on the internet rather than needing to be adjacent to content, such as that found in local newspapers.

Tech companies indeed got big to some extent by creating outstanding products, but it’s also true that they then used their tremendous market power to undercut competition. The lawsuit filed by the U.S. Department of Justice claims that Google, by buying up firms in the ad technology sector, was able to undermine competition and thereby further reduce the revenue for publishers.

There’s also the matter of how their algorithms have harmed democracy and society. As is well known by now, some social platforms — especially YouTube, Instagram and Facebook — make money in part by stoking anger, fear, insecurity and suspicion. 

Do you know what would actually help counter those destructive trends? A lot more local reporters! A flood of new reporters is what’s needed to displace disinformation, rumor and partisan content.

I’ve been thinking about Senator Glazer’s mining metaphor [in which he compares the Gold Rush to mining of data]. Here’s the thing we have to recognize: Mining actually produces all sorts of materials of great value, such as gold, lithium, silicon or rubies. So do tech companies. Yet, at the same time, mining activity also creates collateral damage, what economists call “negative externalities.” Pollution, environmental degradation and worker injuries in the case of land mining; the collapse of local news and the erosion of democracy in the case of data mining.

Both things can be true at the same time. We can appreciate the benefits of mining—whether it’s gold or data — and simultaneously see the urgent need to fix the problems it creates. 

Tech companies say they already provide tremendous value to local news publishers by sending them traffic. There’s some truth to that, but the argument is dramatically overstated. Most consumers don’t read past the headline and snippet that appears on Google or Facebook, even though the news organization might have spent a lot of money to generate the journalism summarized in that snippet. With the growth of artificial intelligence, click-throughs will go down even more, further hurting publishers as tech companies thrive. (By the way, AI is another reason we need more, not fewer, local reporters.)

Google also argues that it shouldn’t be taxed because it provides philanthropic support to local news organizations through its Google News Initiative. I can vouch for that. A program I co-founded, Report for America, got support from them, and their approach to supporting innovation among local news outlets has been consistently thoughtful. Legislators should give them credit for that spending.

But there are a few problems with the argument. Amazon and Facebook do not currently provide any such philanthropic support (nor would they most likely be forced to pay under AB886 [the California Journalism Preservation Act]). This [SB1327] is the first bill we've seen that would actually get Amazon and Meta to pay their fair share. 

Second, Google has made it clear that if legislators pass laws they don’t like, the company will terminate the Google News Initiative. This financial support is awesome but also opaque, insufficient and probably ephemeral.  

I’m not anti-tech. In 1999, I left a career at legacy media companies to start a website because I was frustrated with the old media's backward ways. Since then, I have founded three other websites and, in each case, used Facebook and Google ads to help them grow. However, we need not prove that tech companies are evil in order to justify taxing them.

Nor do I think the whole local news industry is full of angels. The hedge fund ownership of newspapers has caused tremendous damage to communities, too. Some of the industry’s wounds are self-inflicted.

But the premise of this bill is simple. The local news crisis is a catastrophe for American communities and democracy. [The Senate sponsors] have proposed an excellent, First Amendment-friendly, nonpartisan, future-friendly way of addressing it — an employment tax credit for news outlets to hire and retain local reporters. It would have a dramatic, positive impact — the most of any bill in the country right now.

The practical question is: how do we pay for it? It’s fair and reasonable to ask the biggest tech companies — the ones that have benefited the most from this new reality — to spend a tiny portion of their revenue to solve the significant problem they helped create.

Steven Waldman is the founder and president of Rebuild Local News, which advances public policies to revive community news. He is also the co-founder and former president of Report for America.


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