Minnesota Republicans skeptical of DFL's proposed new tax on social media
WASHINGTON, DC - JANUARY 20: Facebook CEO Mark Zuckerberg arrives for the inauguration of U.S. President-elect Donald Trump in the U.S. Capitol Rotunda on January 20, 2025 in Washington, DC. Donald Trump takes office for his second term as the 47th President of the United States. (Photo by Kenny Holston-Pool/Getty Images)
Republicans in the Minnesota Senate and House on Wednesday were unconvinced by Democrats' proposal to implement a first-in-the-nation tax on social media companies that collect data on Minnesotans, arguing the costs of the comparatively small tax on the nation's largest corporations that earn billions annually would eventually trickle down to middle-class Minnesotans.
The bill, chief authored by Senate Taxes Committee Chair Sen. Ann Rest, DFL-New Hope, would impose an excise tax on social media companies based on the number of monthly active Minnesota consumers from whom the company collects data.
Minnesota is facing a looming multi-billion dollar budget deficit, and lawmakers are working to cut spending and generate new revenue to offset the imbalance — the new tax on social media is among the ideas.
Under the bill (SF 3197), the largest social media companies — those that have over 1 million Minnesota consumers — would be taxed $165,000 per month, plus 50 cents times the number of consumers over 1 million.
The Department of Revenue estimates the tax would apply to 14 social media companies. The tax would begin in January 2026 and would generate around $46 million in the first fiscal year, $92 million in the second and about $100 million annually after that.
Meta, the parent company of Facebook, reported $62 billion in profit in 2024, on $164 billion in revenue.
Republicans on the Senate Taxes Committee said the new tax would hurt Minnesota businesses. Local businesses advertise on social media, and platforms like Facebook and Instagram would pass on the cost of the tax onto Minnesota businesses, said Sen. Bill Weber, R-Luverne.
'Quite frankly, if you don't believe that the cost of their advertising is going to go up as a result of a new tax, I think you're kidding yourself. It is going to be a cost to Minnesotans at the end of the day,' Weber said.
Rest on Wednesday acknowledged that the bill will likely lead to litigation, as companies could interpret the legislation to be in violation of the Internet Tax Freedom Act, which prohibits state and local governments from imposing taxes directly on internet access or online activity.
University of California Davis School of Law Professor Darien Shanske, who studies digital taxation, testified that Minnesota would have a strong case.
'It would be inappropriate for legislatures to give up on sound tax policy in the face of novel legal arguments that will ultimately be defeated,' Shanske told the Senate Taxes Committee Wednesday. Courts have generally ruled in states' favor in disputes over revenue generators, he said.
Even as social media companies make hundreds of billions of profit, social scientists are sounding the alarm on the widespread use of the apps, especially by young people.
Democrats on the Senate Taxes Committee framed the tax as one worth fighting for, resembling sin taxes on tobacco and alcohol.
Sen. Grant Hauschild, DFL-Hermantown, compared the social media tax to state taxes on mining. When you mine the earth, Hauschild said, companies pay taxes so people in the area can benefit from social services funded by mining taxes. The same should be done for social media, he argued.
'These are leeches on our society. Leeches that we have come to accept, but they are leeches nonetheless,' Hauschild said of the billionaires who run social media companies. 'There's no reason that we shouldn't, as Minnesotans, decide to fight the fight, take the legal recourse and try to tax these people who are benefiting most from us.'
Versions of the bill were heard in both the Senate and House on Wednesday, and both were laid over for possible inclusion in a tax omnibus bill at a later date.
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