California bill would tax Big Tech to create tax credit for news organizations

Should Big Tech be taxed to pay for more California journalists?

A California lawmaker has introduced a bill that would levy a “data extraction mitigation fee” on companies such as Google and Meta in order to provide media outlets in the state with a tax credit meant to pay for more journalists.

Senate Bill 1327, by Sen. Steve Glazer, D-Contra Costa, would raise around $500 million annually to be split among California news outlets, depending on their size and whether they offer employee health and retirement benefits.

Glazer likened the rise of the tech giants to a new Gold Rush — but instead of gold, these companies harvest massive amounts of data against which they can sell ads. This has come, Glazer said, at the expense of the news industry, much of which is heavily reliant on ad revenue.

“In my opinion, the platforms need to mitigate this damage, and this new bill that we’re introducing today will do exactly that,” Glazer said. California, Glazer said, already imposes “mitigation fees” on other companies, such as those that put chemicals in the environment and developers who burden state roads and schools.

Glazer’s fee would impose the statewide sales and use tax rate of 7.25% on all online ad revenue above $2.5 billion. The base tax credit for news organizations with 10 or more employees would be 25% of the wages paid, and more if the company offers health and retirement benefits. News organizations with fewer than 10 employees would get a credit equal to 35% of wages paid, Glazer said.

News outlets that hire new reporters would get an even larger credit under the proposed law. Glazer said that a journalist at a small publication making $60,000 a year would generate a tax credit of $24,000.

However, the bill limits that tax credit to journalists who live within 50 miles of the community they serve; it would exclude journalists who work remotely or work in bureaus outside that community, such as a Washington, D.C., bureau.

The bill sits in the Senate Revenue and Taxation Committee, which Glazer chairs. There is no hearing scheduled.

Representatives from Google did not respond by deadline to The Bee’s request for comment. A representative for Meta said the company has no comment at this time. The Bee also reached out to tech industry trade groups, including the Chamber of Progress and Technet, for comment.

Dylan Hoffman, Technet’s executive director for California and the Southwest, told The Bee in a prepared statement: “SB 1327 is a billion-dollar tax that will ultimately hurt California entrepreneurs. It will prevent consumers from learning about new products and services and punish small businesses across the state that rely on digital advertising to reach and attract customers, find talent, and compete against larger companies.”

Chris MacKenzie, with the Chamber of Progress, told The Bee that his organization is still analyzing the bill.

The legislation is supported by a number of groups, including the California Federation of Teachers and the Media Guild of the West.

“It cannot be overstated how desperately in crisis this industry has become over the last 20 or so years,” said Nadia Taha, executive director for the the Media Guild of the West, during Wednesday’s news conference.

“It’s a dire situation, and so while this bill is ambitious, we feel it’s very appropriately ambitious to address the real needs of both working journalists and their employers and the communities that they both seek to serve,” Taha said.

Other groups, including the California News Publishers Association — which includes Sacramento Bee parent company McClatchy as a member — have yet to take an official position on the bill.

“It’s a very complex bill and topic, so we will look forward to seeing the language in print and to be able to do a deeper analysis,” CNPA General Counsel Brittney Barsotti told The Bee.

Another media advocacy group, Free Press Action, expressed tentative support for Glazer’s bill in a letter, but also called for it to be amended to include a cap on revenue for eligible news organizations.

“Given that the data extraction mitigation fee would generate a fixed amount of revenue, every dollar that goes towards out-of-state broadcasters like Sinclair and Rupert Murdoch’s Fox Corp. is a dollar less that could have gone toward small publishers, ethnic media, and community-rooted outlets — entities that are providing impactful, local, public interest journalism across our state,” the letter reads in part.

The letter also calls for ethnic and community-specific media to receive a larger share of the money, and to expand the funding option for nonprofits, which as tax-exempt organizations would otherwise be ineligible to receive the credit.

Barsotti told The Bee that CNPA continues to stand as a “proud sponsor” of a separate bill, Assembly Bill 886. That bill, by Assemblywoman Buffy Wicks, D-Oakland, would require tech companies to pay for news content that shows up on their platforms. Google and Meta both oppose that legislation, and Google recently announced that it is experimenting with removing California news links from its search platform for some users.

At his Wednesday press conference, Glazer said his bill “is not meant to replace or compete with other similar legislative initiatives,” such as AB 886.

“My bill is a separate option for the Legislature to consider,” he said.