Latest news with #SenateTaxesCommittee
Yahoo
22-04-2025
- Business
- Yahoo
Social media companies are like tobacco companies; tax their products for their harms
(Photo by Nicole Neri/Minnesota Reformer) If you are sick of big tech's creepy data collection and invasive advertisements, then you might like a new bill, authored by Senate Taxes Committee Chair Ann Rest, DFL-New Hope, proposing a tax on data collection by large social media platforms. By assessing a flat rate as well as additional per capita fees on social media platforms with over 100,000 monthly users, SF3197 would raise an estimated $137 million in 2026-27 from the 14 largest platforms operating in Minnesota. Like efforts to curtail multinational corporate tax avoidance in 2023, this is an important and innovative idea that would once again make Minnesota a national leader in creating a stronger and more equitable tax code. Democratic lawmakers registered enthusiastic support during initial hearings, with pointed criticisms of an exploitative industry. House Ways and Means Chair Zack Stephenson, DFL-Coon Rapids, and Sen. Grant Hauschild, DFL-Hermantown, likened the data mining tax to taxes on smoking and mineral extraction, respectively. Hauschild went so far as to describe social media platforms as leeches, and he's not off base. In 2024, for example, Meta made $62 billion in after-tax profits on $164 billion in revenue for an astounding 42% profit margin. Out of $69 billion in net revenue, they paid just $8.3 billion in taxes for an effective tax rate of 12%. These earnings don't result from new value or innovation in the traditional sense, but from attention-seeking business models that create addictive behavior among users while generating few jobs and little in socially productive economic activity. Multiple scientific studies have found social media use is strongly associated with increased rates of mental health challenges like depression, anxiety and disordered eating, especially among children and adolescents. Social media advertising models have also contributed to the degradation of our information ecosystem, which is an essential pillar of democracy. The southwest Metro and southeastern Minnesota lost 10 local newspapers last April alone, all replaced with nothing other than Facebook rage and viral conspiracy theories. In my testimony on the bill, I explained how the policy could be described as a Pigouvian tax — a tax levied on a socially harmful activity in hopes of reducing its prevalence and/or raising revenue to compensate for its deleterious effects. Big tech is increasingly leveraging in-depth user knowledge to extract maximum profit. To allow these practices to proliferate with minimal regulation is bad enough, but to do so without any fiscal compensation is simply foolish. A tax on data mining is especially important in the case of social media platforms because they offer their services for free, in exchange for access to consumer data, which is then monetized through the sale of advertising. Economists describe this as a barter — you give them lots of data about yourself, and in exchange they let you scroll for free — and policy experts have written on the importance of taxing such transactions, both to discourage the rampant acceleration of hidden extraction, and so that the public can benefit from growing industries in which traditional monetary transactions don't occur. To put it in simple terms: The Zucks of the world are enriching themselves by pumping us full of free content that comes with high hidden costs. The new tax would act as a limiter, or at least a compensator, for those hidden costs. Similar to the discussion around sales tax exemptions, there is a fairness argument for businesses here as well. According to the Department of Revenue, businesses pay nearly half of all state sales taxes, but not all industries incur the same sales tax liabilities. White collar and other intangible services are generally not subject to sales taxes while many tangible goods are. A parallel pattern plays out in the broader economy: If growing online industries generate substantial profit based on the value of consumer data, but consumer data is not taxable, then these industries have an inherent advantage over others, even if those others provide more socially productive goods and services. That's a lot of reasons to celebrate. None of these arguments will persuade influential business groups to support the idea. With an evenly split House, any tax increase will face a difficult path to becoming law. Initial objections by the business-funded Council on State Taxation follow a familiar pattern — using legalese and overly complex language to grant an air of authority to their arguments that boil down more simply to 'our wealthy funders don't want to pay taxes.' But while many of these points are in bad faith, Minnesota would be the first state to pass this policy, and there are implementation questions as well as a guarantee of court challenges, which have arisen over similar policies in Maryland. Legal challenges will arise, not because it is illegal or unjustified, but because large tech firms have the money and incentive to fight tooth and nail against any new tax. This is what happened with digital ad taxes in Maryland, but advocates there have cleared significant hurdles, and the state is collecting tax revenue in the meantime. There's something deeply undemocratic about this strategy of legal obstruction, and Minnesota shouldn't be deterred. As bad news goes, that's not the worst. The data mining tax, though certainly worthwhile, is the result of a politics that sees taxes as a punishment that should be heaped only on the wicked. I am all for taxing extractive practices, but those sorts of policies won't get us anywhere near the revenues we need to avoid looming cuts to education and disability services, let alone mitigate the damage wrought by impending federal budget cuts. The real revenues we need will require raising taxes on a larger swath of Minnesota residents and businesses — something politicians on both sides of the aisle are very reluctant to do. In tax policy circles, there's a phrase used to describe this dynamic. 'Don't tax me, don't tax thee; tax the man behind the tree!' In other words, everyone wants a tax that raises revenue from someone else. And that's the exact sort of thinking we are seeing here, as fingers point to a handful of large companies with poor reputations that are nowhere near the primary culprits of our top heavy economy. In New York, for example, a similar bill created a rate and fee structure much the same as this one, but applied it to all data collection, not just that by social media platforms. That policy design brought in banks, credit card companies, cell phone providers, and more. That would raise considerably more revenue and much more meaningfully crack down on unfettered data collection as a business model. But it would seem that even those major industries didn't make for a clear enough villain for Minnesota legislators this time around. Furthermore, and somewhat ironically, some of the same senators that railed impressively against social media platforms are also moving to potentially expand tax breaks for data centers run by some of the very same companies impacted by the social media data mining tax. I think they mean well, and I can understand the desire to attract new high-paying jobs. But the contrast reveals that we are still in need of a deeper attitude adjustment around taxes. Taxing online enterprises is essential to the state's long-term budgetary stability, so I am glad we are starting the conversation. In a bad budget year, it's refreshing to see legislators fighting to make more profitable corporations pay their fair share. But this policy is not on par with our revenue needs. We can't just find someone we don't like and tax them. We have to agree to tax ourselves because it's the only way to create a more effective government and humane society moving forward.
Yahoo
10-04-2025
- Business
- Yahoo
Proposed tax on social media platforms in Minnesota could raise over $300M
Minnesota legislators are weighing a new tax on social media platforms that could raise $334 million in the next four years as the state faces a multibillion-dollar deficit later this decade and uncertainty surrounding federal funding. Under a proposal introduced by Senate Taxes Committee Chair Ann Rest, DFL-New Hope, large social media platforms like Facebook, Instagram, TikTok and X would pay a tax on the collection of user data, which they sell to advertisers. What lawmakers said is a first-of-its-kind state tax would be based on usership for platforms with 100,000 or more monthly users in Minnesota. It would scale up depending on the number of users on the platform, with the top bracket applying to platforms with 1 million or more users. 'For many years now, social media platforms and businesses have taken our information, our identifying information, and used it to make millions and millions of dollars,' Rest told the Senate Taxes Committee as she presented her bill on Wednesday. 'We hope we can modernize the way in which our tax systems work, recognizing the world has greatly changed.' If the new social media tax were to take effect as a part of this year's two-year state budget, it would raise about $46 million in its first year. That amount is expected to grow to more than $90 million annually in the following three years, according to an analysis by the Minnesota Department of Revenue. The Senate and House tax committees heard versions of the bill Wednesday and held it over for possible inclusion in a larger tax package bill later in the session. It could face a tough path forward in the House, where Republicans and Democrats both have 67 seats. GOP lawmakers say the state shouldn't pass any new taxes and should focus on rolling back the large expansion of spending that happened under Democratic-Farmer-Labor controlled government in 2023. Rest and other supporters who testified in favor of the new tax said it would ensure that large companies profiting off user data — which they get by providing otherwise free services — are paying their fair share in Minnesota. 'This bill proceeds from the very reasonable premise that this extraction of value should be taxed the way the extraction of many other valuable natural resources are taxed,' said University of California — Davis law professor Darien Shanske, whose work focuses on state and local tax policy. Economic disruptions and federal budget cuts caused by President Donald Trump also could mean more stress on state resources in the months and years ahead, supporters said. 'This bill is badly needed because it provides revenue that could be used to help those that will be hurt if the social safety net is shredded,' said Phillip Sandro, a retiree with health issues living on a fixed income who spoke for the progressive faith group Isaiah. Supporters also argued that negative social consequences from social media platforms, such as potential harm to younger users' mental health, warrant taxation because of the cost they pose to society. Politicians have targeted companies like Facebook parent Meta in recent years after studies showed that excessive teen social media use was tied to psychological distress. Minnesota is set to have a $456 million budget surplus in 2026-2027, but as lawmakers put together a two-year state budget this spring, a $6 billion deficit looms in the following 2028-2029 fiscal year. Early proposals from the Governor's Office, House and Senate have largely centered around billions in cuts, but Democratic-Farmer-Labor senators and representatives have left new taxes on the table. Republican Senators questioned the need for any new taxes when the state grew spending by 40% in the last budget passed in 2023, which saw state spending top $70 billion and used most of a record $18 billion budget surplus. 'The reason why the state of Minnesota is facing a $6 billion structural deficit is because of the overspending, the unsustainable spending over the last two years,' said Sen. Jeremy Miller, R-Winona. 'When you spend more than the revenue coming in, it's unsustainable; it's simple math.' Opponents also said a tax on social media platforms will hurt small businesses in the state who rely on targeted advertising to reach local and regional customers. New social media taxes would mean big companies would pass the cost along to smaller business customers, argued it would limit access to targeted ads. 'Minnesota's consumers, small businesses, retailers, family farms and even newspapers that would feel this squeeze,' said Deb Peters, a lobbyist with Americans for Digital Opportunity and the Association of National Advertisers. 'Taxing advertising, especially online, raises prices for everyone.' Business interests also noted that passing a law targeting social media with a new tax could attract legal action. The Internet Tax Freedom Act, originally passed in 1998, protects online businesses from state and local government taxes that apply only to digital commerce, wrote the Midwest branch of TechNet, a group representing technology executives. New MN office for missing, murdered Black women and girls aims to build awareness MN House bill aims to assist families with child care costs Push to release Sen. Nicole Mitchell arrest video gets new chance on appeal St. Paul nonprofit pays $7.3M to turn Bandana Square hotel into emergency shelter Minnesota health department cuts 170 jobs after federal COVID grant freeze
Yahoo
09-04-2025
- Business
- Yahoo
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.
Yahoo
03-04-2025
- Business
- Yahoo
Minnesota Senate Democrats propose new tax on social media companies
A view of the Capitol dome on March 6, 2025. Photo by A.J. Olmscheid/Senate Media Services. Minnesota Senate Democrats are proposing a first-in-the-nation tax on large social media companies that collect data on Minnesota consumers. The bill, chief authored by Senate Taxes Committee Chair Sen. Ann Rest, DFL-New Hope, would impose a 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. In an interview, Rest said taxing social media companies is a solution that doesn't hurt Minnesotans — it doesn't cut critical social services or increase their taxes. 'We know we're going to see some cuts, but I also felt it was my job to look for some fair ways to provide the revenue,' Rest said. 'We're talking about folks like Elon Musk and Mark Zuckerberg. We've been giving to them for years and years, and now we're going to ask those social media businesses to participate in solving Minnesota's budget challenges.' Under the bill (SF 3197), if a social media company has fewer than 100,000 monthly consumers from Minnesota, it wouldn't be taxed. If the social media company has between 500,000 and 1 million Minnesota consumers, the tax per month would be $40,000 plus 25 cents times the number of consumers over 500,000. For the largest social media companies — those that have over 1 million Minnesota consumers — the tax per month would be $165,000 plus 50 cents times the number of consumers over 1 million. The Department of Revenue estimates that the tax would apply to 15 social media companies. The tax, which would begin in January 2026, 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. Even as the companies make hundreds of billions of profit, social scientists are sounding the alarm on the widespread use of the apps, especially by young people. Republicans this year have said that they will not support any new taxes on Minnesotans, so lawmakers have been looking for areas to cut spending. When asked whether House Republicans would support a tax on social media companies, a spokesperson said no. 'Our position is no tax increases,' a House GOP caucus spokesperson said. New York since 2021 has proposed taxing social media companies for data collection, or data mining, and a similar bill is again being considered by the New York Legislature this year. Rest said that she hopes Minnesota's legislation can be regarded as a model for other states that are experiencing budget shortfalls. The bill will be heard in the Senate Taxes Committee on Wednesday, and Rest said House Taxes co-chair Rep. Aisha Gomez, DFL-Minneapolis, will be introducing the House version soon.
Yahoo
27-03-2025
- Business
- Yahoo
Cities and developers want state money to convert office buildings to housing, other businesses
Minneapolis Mayor Jacob Frey testifies on March 27, 2025, in support of a bill that would extend a state tax credit to projects that convert underutilized office buildings to residential or other commercial uses. Photo by Madison McVan/Minnesota Reformer. As the value of commercial buildings collapses in the wake of the pandemic, Minnesota city leaders want state help to convert underutilized buildings into housing or better commercial uses. Office towers that were once prime locales for blue chip tenants have been selling at massive discounts — 97% in one recent case — alarming city leaders who are forced to shift the tax burden to residents. There are already state and federal tax credits for the rehabilitation or conversion of historic buildings, but developers and city leaders want a bigger state tax credit — up to 30% of a project's cost, compared to 20% for the existing historic state credit — and to apply it to more buildings. The bill (SF768/HF467) does not require that the buildings be converted to housing to qualify for the credit. Instead, conversions qualify if they remake a commercial building for another commercial use that the building was not originally built to accommodate, or if at least half of the building has been vacant for five years, and the conversion 'will return that vacant area to an income-producing, habitable condition.' The credit — called the 'credit for conversion of underutilized buildings,' or the 'CUB credit' — would apply to buildings at least 15 years old. 'The CUB credit is not the silver bullet that will fix all of our cities' challenges,' said Sen. Zaynab Mohamed, DFL-Minneapolis, the bill's chief author. 'However, without it, many adaptive reuse projects in Minnesota simply will not move forward.' Any program that will cost the state money will have a difficult path to passage this year. The state is spending more money than it's bringing in, meaning lawmakers will look for areas to cut more than new programs to spend on. Senate Taxes Committee Chair Sen. Ann Rest, DFL-New Hope, said in a hearing Thursday that the bill as written is too expensive — a Department of Revenue analysis found it would cost between $20 and $25 million per year, with no cap on payouts. Mohamed said the program could be capped based on budget targets. Converting office buildings to apartments is complicated. Many office towers aren't structurally fit for housing: Some are so large that many apartments would lack windows, a dealbreaker for prospective residents. Others have exteriors made almost entirely of glass. Plumbing is often centralized — one floor may have one or two common restrooms, while apartments require many bathrooms spread across the floor. And while interest rates have dropped from their most recent peak in 2023, they're still well above the rates of the 2010s and the historic lows reached during the pandemic. Zoning rules can also present hurdles to redevelopment. Minneapolis changed its rules last year to eliminate some red tape for office-to-residential conversions, exempting developers from public hearings, extensive traffic studies and the city's inclusionary zoning ordinance, which requires developers to either include a number of affordable housing units or pay large fees to the city. Minneapolis Mayor Jacob Frey testified in support of the tax credit proposal. Commercial property values in Minneapolis have dropped by 9.5% over the past year, and the shrinking commercial tax base means an increased property tax burden on homeowners. Rest, a co-author of the bill, pointed out that commercial properties are taxed at a higher rate than residential properties, so conversions could reduce the tax rate on many buildings. Higher post-conversion property values would more than offset the lower tax rate, said Chris Sherman of Sherman Associates, a Minneapolis real estate developer that recently converted the historic Northstar Center East from offices to a mixed-use building with more than 200 apartments. The bill was laid over for possible inclusion in a larger tax bill.
