Google’s recent deal with California to allocate over $172.5 million to journalism and artificial intelligence initiatives is seen as an ad-hoc measure to bypass more stringent tax and regulatory policies. This intervention allows the company to make voluntary, tax-deductible contributions to nonprofits rather than paying taxes directly intended to support journalism. Critics argue that such short-term contracts fall short of what can be achieved through a broader data tax policy.
One idea gaining traction among lawmakers is the implementation of a tax on user data, particularly data used for advertising purposes and AI model training. This approach would provide a steady revenue stream for journalism initiatives rather than the temporary infusions of capital characteristic of deals like the one between Google and California. Proponents believe a data tax would align more closely with the significant influence tech companies wield in the state.
California’s commitment of $70 million to journalism as part of the agreement with Google has been positioned as a simpler alternative to complex regulatory frameworks and “link tax” legislation—proposals actively opposed by the tech giant. For instance, the California Journalism Preservation Act, which would have mandated payments from tech companies for access to journalism providers, was set aside in favor of the recent agreement. A related piece of legislation, still in committee, seeks to establish a tax on companies for “data extraction transactions,” which would similarly support journalism through grants and fellowships.
This is part of a broader pattern where tech companies like Google and Facebook negotiate individual agreements to avoid more stringent regulatory or tax measures. Google has already made comparable arrangements in countries such as Canada and Australia.
The technology sector’s growing emphasis on data collection for large language models like Google’s Bard and OpenAI’s GPT-4 further underscores the need for comprehensive tax policies. Companies like Google and Meta profit immensely from advertising, much of which depends on mined user data and the ingestion of third-party content for AI model training. As such, assigning a tax rate based on these activities could ensure fair compensation for data originators, whether they are individuals or news outlets.
To achieve this, a data tax strategy could include components where businesses are taxed on revenue from digital advertising and data ingestion. Such policies would necessitate precise definitions for user data and content ingestion, along with enforcement mechanisms to prevent tax evasion or underreporting.
The Google-California agreement, while providing short-term benefits for journalism, raises questions about its long-term effectiveness—especially given its five-year duration and the tax-deductible nature of Google’s contributions. Much of the pledged $172.5 million may be offset by reduced tax receipts, thereby shifting the financial burden onto taxpayers. To sustain journalism support more equitably, lawmakers may need to consider more permanent tax policies instead of temporary deals.
Andrew Leahey is a tax and technology attorney, principal at Hunter Creek Consulting, and adjunct professor at Drexel Kline School of Law. Follow him on Mastodon at @andrew@esq.social
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