Earlier this month, former Senate President Thomas V. Mike Miller Jr. and current Senate President William “Bill” Ferguson introduced legislation that would impose a tax on annual gross revenues derived from digital advertising platforms. The “Digital Advertising Gross Revenues — Taxation” bill would devote much of the revenues generated from the tax to the Blueprint for Maryland’s Future Fund, which would put billions of dollars toward education over several years and is a legislative priority of both the House and Senate.
After introduction of the bill, The American Advertising Federation of Baltimore and AAF National immediately sounded the alarm. “In effect, the bill seeks to tax revenues from digital advertising services that are delivered in Maryland," the trade groups said in a statement. "The language of the bill shows a lack of understanding of the complexity of digital advertising making it vague and dangerous. If enacted, it would give Maryland the dubious distinction of being the only state in the country to pass a discriminatory digital advertising tax that runs afoul of Federal law and the Constitution.”
The agenda behind the bill is part of the Democratic-led Senate’s scramble to raid funds from any source they can to try to justify the incomprehensible cost of implementing recommendations of the so-called Kirwan Commission for education investment. This agenda is ill-informed, ill-advised and patently irresponsible. Attempting to pay for the Kirwan plan on the backs of businesses so legislators can claim they didn’t raise taxes on individuals is as economically dangerous as it is preposterous.
In reading the proposed legislation, one is left to contemplate one of two conclusions:
- The bill’s authors have such contempt for business, its importance to Maryland’s economy and disregard for the intelligence of voters and taxpayers, that they seek to posture the bill under the pretense of reaping financial gains from digital and social media giants to fund Maryland’s floundering education system. In reality, the burden will only directly impact the operations and administrative costs of marketing and advertising agencies, including businesses based in Maryland.
- The bill’s authors are negligently ignorant in understanding the complexities and intricacies of digital marketing and how digital transactions actually work. And they sought no informed counsel in drafting the legislation.
In either case, the impact of this legislation, if enacted, will never touch the digital media platforms themselves, and make no mistake, the ripple effect will be catastrophic. At the most basic level, the administrative burden of compliance would be exponentially astronomical. Digital marketing analytics move literally at the speed of light. Even an army of digital strategists and coordinators wouldn’t be able to keep up with the speed in which withholdings for projected placements and impressions would have to be calculated and managed. Making accurate conclusions of this fool’s endeavor would be impossible and in drastic conflict with the timing in which campaigns must be executed.
Marketing and advertising agencies would be forced to pass this burden onto clients. The inconceivable administrative cost, inability to meet timelines and significant reduction in reliable metrics and return on investment would never be tolerated by clients. Instead, they will pull their money out of Maryland.
This doesn’t even begin to factor in the burden Maryland’s comptroller will surely endure in trying to manage an entire new staff dedicated to administering and auditing this tax with absolutely no education or expertise in the space or subject matter. This agenda would collapse on its flawed logic even if it weren’t to be struck down on legal grounds first. It will net zero funding for the Kirwan plan and instead leave Maryland void of digital marketing investment at all.
If forced, the marketing and advertising industry will have no choice but to unite in seeking injunctive relief from these distinctly un-American intentions and pool our resources to do what we do best in creating profound public awareness. We will make it clear that Maryland is bad for business. The marketing and advertising industry, along with every voter and taxpayer, should unite in staunch opposition and take action immediately to let our state senators know we don’t want them driving business out of Maryland with monopolistic and unconstitutional measures to fund plans they haven’t figured out how to pay for.
Sean Brescia (email@example.com) is principal and director of business strategy & development for Mission Media, a Baltimore-based branding and marketing agency.