The California Senate’s Appropriations Committee voted May 13 to move a bill meant to revive local journalism in the state to the mysterious suspense file—where some measures are said to “die in silence.”
The measure is Senate Bill 1327, authored by Sen. Steve Glazer, which would help local journalism by offering tax credits to media companies for employees retained and newly hired and would tax large tech firms to offset the credits.
If ultimately approved, the bill would impose a tax on large tech companies for selling digital advertising and extracting data from users.
Supporters say the measure is necessary to protect the media industry from competitive pressure for advertising dollars.
“SB 1327 creates a modern financial framework to ensure that newsrooms keep our citizens informed and democracy accountable to the people,” Mr. Glazer said in legislative analyses. “The fee in my bill assigns the cost of reviving local journalism to those firms whose data extraction and economic activity is causing the news industry’s decline.”
He likened the extraction of data to a second California Gold Rush, suggesting that more needs to be done to balance unintended consequences of advertising-related business models on the news industry.
“A vibrant local press that informs the public and acts as a government watchdog is vital to the survival of American democracy,” Mr. Glazer said. “Unfortunately, the crucial role of local news in upholding democracy is in danger.”
One supporter agreed, noting the significant effect of technology on journalism since the start of the century—with the number of journalists working in California falling by 68 percent since 2005.
“It cannot be overstated how desperately in crisis this industry has become in the last 20 or so years,” Nadia Taha, executive director for Media Guild of the West—which represents hundreds of journalists in Southern California, Arizona, and Texas—said during a press conference announcing the bill on May 1. “It’s a dire situation.”
A co-author of the bill with a background as a journalist concurred and suggested the press is immensely beneficial to society.
“I know the value of journalism and the important role it plays in sustaining our democracy,” Sen. Catherine Blakespear said during the press conference. “We cannot have informed voters if the free press isn’t telling all of us what our government is doing.”
She focused on the shift of revenue streams that changed with the increase of online technology that has affected the industry—with newspaper advertising revenues falling from $26 billion in 2010 to $18 billion in 2017 nationwide. In California, media companies’ ad revenues have dropped by about 66 percent over the past 10 years.
While such ad revenues are on the decline, technology companies are experiencing a windfall of profits. The three companies primarily targeted by the bill—Amazon, Google, and Meta—sold $163 billion worth of advertising and data collection services in 2022.
“Sadly, the rise of the internet ... has wreaked havoc on the news business,” Ms. Blakespear said. “This is a terrible development that is hurting our democracy and undercutting civic engagement at all levels.”
She said it is the government’s responsibility to identify solutions when society is negatively affected by market forces.
“This is where government should step in,” Ms. Blakespear said. “When the free market cannot deliver something that society needs, we need to intervene and provide an incentive or way to fix the problem.”
The proposal would impose a 7.25 percent tax on gross revenues related to advertising and data extraction for tech and social media companies—though those with less than $2.5 billion in annual revenue of that kind would be exempt.
Opponents argue that any fees imposed will ultimately be passed on to consumers, as advertising rates will increase and businesses will look to recoup costs with higher prices on goods and services.
“This bill punitively targets only a handful of taxpayers that sell digital advertising, yet will financially cripple many, many small and medium-sized businesses,” Preston Young, senior policy advocate for the California Chamber of Commerce, said in legislative analyses. “The brunt of this tax will ultimately be borne by smaller employers that rely on advertising to increase the reach of their business.”
Dozens of organizations opposing the measure wrote to the Legislature citing what they describe as an unfair proposition that forces certain companies to incur costs related to reviving local journalism.
They argue that the decline of print media began before internet access was widespread and suggested that shifting business models are natural in a free market.
Other states—including New York, Kansas, and West Virgina—are also considering similar proposals to tax large internet-related companies and to close what some say is a loophole that allows certain revenue-generating services to avoid taxation.
Maryland is the only state with a law that taxes digital advertising—having passed the measure in 2021 following a veto from the governor and subsequent override by the state Legislature—though the tax is facing legal challenges at the state and federal levels.
Around the world, the United Kingdom, France, and some other European nations have similarly enacted digital services taxes.
With SB 1327 on the suspense file, its future is uncertain; a decision on whether it will proceed to the Senate floor for debate is expected in the coming days.
If it clears the appropriations hurdle, the proposal will require a two-thirds vote to pass, and if it is ultimately approved by the Legislature and signed into law, it will take effect immediately because of its urgency clause.
