Maryland’s legislature last week overrode Gov. Larry Hogan’s (R) veto to impose the first-ever tax solely on digital advertising. Similar proposals are pending in Connecticut and Indiana, and others may resurface in West Virginia and New York. The idea is that technology companies headquartered elsewhere aren’t paying their “fair share” when they profit from the personal information of consumers in the state by selling ads. These companies counter that it isn’t fair either to single them out as a means of making up a budget shortfall. (The Post has lobbied against the Maryland bill as part of a group including publications likely to be affected; a media exemption is expected soon to pass the chamber.)
As a matter of principle, states are free to come up with idiosyncratic taxes on goods and services. As a matter of policy, however, there are questions about going after online ads alone — legal, constitutional and practical. Taxing only digital ads and not print ads may run afoul of federal law; hitting out-of-state and even out-of-country companies the hardest may violate the Constitution’s commerce clause; the businesses that buy ads may end up bearing the burden of the tax rather than the titans who sell them. Groups representing Google, Facebook, Amazon and others sued Maryland on Thursday on some of these grounds (Amazon founder Jeff Bezos also owns The Post). And, of course, there’s the conundrum of ascertaining which ads are actually seen by Marylanders — and should therefore be taxed in Maryland.
Wrinkles such as these are inevitable when a state tries to regulate an industry that by nature spans 50 states and scores of countries, too. That’s not to mention the wrinkles for companies complying with a hodgepodge of regulations — a tougher task for scrappy upstarts than for titans. Sometimes states’ motivation is to address perceived ills long ignored, sometimes it is to bring in needed cash, and usually it is the two together. The incoming measures are sure to vary in their effectiveness, as well as their ability to stand up to scrutiny in a court, yet they all have something in common: They take advantage of a yawning chasm in our nation’s laws. As much scrutiny as states such as Maryland deserve for the action they’re taking, Congress deserves more for taking none at all.
Read More: Opinion | Do your job and regulate tech, Congress — or states will try to do it for you