States Take the Fight to Big Tech

Silicon Valley, a darling no more.

This is Boondoggle, the newsletter about corporations ripping off our states and cities. If you’re not currently a subscriber, please click the green button below to sign up. Thanks!

Generally, when I write about large tech corporations here, it’s in the context of a ridiculous giveaway: Subsidies for a Facebook data center, more handouts for Amazon warehouses, or tax breaks for an Apple campus that are draped in secrecy. But being doom and gloom all the time is, first, a bummer, and second, not reflective of the reality of the debate regarding Big Tech in the public square.

So today I’m going to highlight a few trends at the state level where lawmakers have decided they’ve had enough of letting giant tech firms push around their local businesses and constituents. The ideas range from good to meh, but they’re all indicative, I think, of real momentum to grapple with the harms these corporations cause in local communities. Here’s what’s happening:

Digital ad taxes. Maryland last week became the first state to levy a tax on digital advertising revenue, and several other states are supposedly working up similar bills, including Connecticut and Indiana. The idea is to get at the revenue stream dominated by Google, Facebook, and to a lesser extent Amazon, which together make up about 75 percent of the digital ad market. These are the ads you see every time you sign onto one of those platforms, and which are the backbone of Facebook and Google’s business models, as the vast amounts of data they collect allow them to ever more perfectly target ads to individual users. Maryland’s bill was passed over the veto of Republican Gov. Larry Hogan, and only applies to corporations with more than $100 million in global digital ad revenue.

App store regulations. The North Dakota Senate this week voted down a bill that would have barred app distributors like Apple and Google from doing two things: First, forcing users to only download apps through their official stores, like the Apple App Store, and second, forcing app developers to only use payment systems designed by those platforms in order to accept money from users. Apple quite notoriously forces apps to uses Apple’s own, in-house payment system, which allows Apple to take up to a 30 percent cut of revenue. Apple boots from the app store any companies that try to circumvent that payment system. Though North Dakota’s push was unsuccessful, similar bills have been introduced in Arizona, Georgia, and New York, and will likely crop up elsewhere too.

Delivery app regulations. 60-some cities and counties have put caps on the amount delivery app corporations such as GrubHub and Doordash are allowed to charge restaurants during the pandemic, limiting commissions to 10-15 percent, when the apps would rather be charging 30 percent of each individual order (or more) for doing nothing more than being a middleman between restaurants and their customers. A few states have now gotten into the game too, with Massachusetts, New Jersey, Oregon, and Washington capping fees, and Minnesota, New York, Texas, and California having proposals to do the same. California and the District of Columbia have also eliminated the pernicious practice of delivery apps posting menus of restaurants that haven’t agreed to do businesses with the apps, as a way to cajole them into forming a “partnership.”

These are quick and dirty descriptions, but I hope you get the gist. I like some of these ideas better than others. The regulations around delivery apps are great. I edited this report by my colleague Moe Tkacik on just how horrific delivery apps are to the restaurants forced to deal with them. Fee caps are a simple regulation on what is a simple service, and knocking out some of the fraud in which the app corporations engage is obviously the correct thing to do.

I also like the app store bills, as it’s pretty clear many small and midsize software developers are stuck under the thumb of Apple and Google, even if I think the claims proponents make about every developer in the country suddenly rushing to live in a cold northern state due to the change is overblown. Maybe Arizona will be more appealing?

Finally, a digital ad tax is … fine, I guess. I see why lawmakers want to implement them, as they could raise a lot of money — Maryland estimates it could raise $250 million at a time of crunched state budgets — but a tax on ad revenue doesn’t actually change the way Facebook and Google do businesses, contrary to some assertions, it just makes them pay up for some of the destruction they’ve caused. (You can read this for a sense of what I’m talking about.) This tax would only work as a deterrent if it was really high, which this is not.

Looked at from 10,000 feet though, this is all promising momentum toward a grander solution regarding the role big tech will play in all our lives and what those corporations will and won’t be allowed to do to us, the businesses we frequent, and the communities we build. And it’s a promising counterpoint to the usual race-to-the-bottom effort to throw as many tax breaks and other giveaways as possible at every big tech firm due to the allure of fancy jobs and economic benefits that turn out to be illusory.

If you see other efforts like these in your state, please flag them for me. And if you live in one of the states where bills already exist and want help identifying which lawmakers support these efforts so you can call or write letters, let me know. I’m happy to help.


SHAMELESS SELF-PROMOTION: My colleague Morgan Harper and I will be giving a virtual talk at the Bexley, Ohio, Public Library on corporate consolidation and democracy on March 10 at 7 p.m. You can register to listen here.

ONE MORE THING: I’ve written before about “dark store theory,” the scam big box retailers use to lower their property tax bills by claiming that thriving stores should be valued as if they are empty, worthless husks. Here’s why this debate matters to real people: Boone County, Indiana, fought the good fight to prevent Meijer, a grocery store chain, from employing dark store theory, and the difference is $1.7 million in property tax revenue that otherwise would have been shifted onto local residents and businesses. That’s real money!

There is also a bill in the Indiana state senate — SB 307 — that would permanently dump dark story theory onto the scrap heap. Good stuff all around.

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Thanks again!

— Pat Garofalo