The first tax on digital ad revenue from Big Tech companies is headed for Maryland after the state Senate voted on Friday to override Gov. Larry Hogan’s veto.
That tax, which is projected to generate as much as $250 million in its first year, will fund the state’s education reform. The Senate voted 29-17, just making it past the two-thirds threshold necessary to override a veto.
The law will impose a 2.5% tax on ad revenues from companies that make between $100 million and $1 billion. Companies that make more than $15 billion, such as Google and Facebook, will pay a 10% tax on ads that are displayed inside the state.
Hogan and business groups argued that the tax will get passed down to small businesses that rely on Big Tech companies for advertising. The Tax Foundation said the tax was “unworkably vague” and illustrated “how lawmakers have failed to take the complexity of digital advertising into account in structuring the proposed tax.”
In a letter announcing his veto, Hogan called the bill “misguided” and warned that it would impose a tax hike on Marylanders.
“With our state in the midst of a global pandemic and economic crash, and just beginning on our road to recovery, it would be unconscionable to raise taxes and fees now,” Hogan wrote. “To do so would further add to the very heavy burden that our citizens are already facing.”
Supporters said the tax and the educational funding it will generate will be necessary for promoting equality among students in the state, particularly through the coronavirus pandemic.
“Even before the pandemic, the disparities were stark and widespread,” Prince George’s County Del. Alonzo Washington said after the Maryland House of Delegates overrode Hogan’s veto on Monday. “Disadvantaged students aren’t asking for a handout. They are asking for a level playing field.”
Other states are considering similar initiatives. Digital ad tax proposals have already been introduced in Connecticut and Indiana, and other states attempted to pass similar legislation in 2020 but were unsuccessful.
