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Proposal to tax digital ads to help Maryland pay for education is met with skepticism, opposition

Maryland Senate President Emeritus Thomas V. Mike Miller speaks after his portrait was unveiled in the Senate chamber in the State House in Annapolis on Monday, Jan. 13, 2020.
Maryland Senate President Emeritus Thomas V. Mike Miller speaks after his portrait was unveiled in the Senate chamber in the State House in Annapolis on Monday, Jan. 13, 2020.(Pamela Wood/Baltimore Sun)

Maryland lawmakers began discussion Wednesday of how to solve the biggest challenge they face this year: how to raise billions of dollars for extra spending on public education.

“Today kicks off the first real day of the 2020 session,” said Senate President Bill Ferguson, speaking before a committee that reviews tax proposals.

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Ferguson was joined by his predecessor, Senate President Emeritus Thomas V. Mike Miller, in pushing for a first-in-the-nation tax on digital ads. A nonpartisan analysis estimates the tax might be able to raise $250 million per year that could be used for education.

“It’s bold. It’s innovative,” said Miller, who stepped down from his leadership post this year but still commands significant respect in the Senate.

Miller and Ferguson, both Democrats, hope their digital ad tax could be one piece of the funding puzzle for the education reforms recommended by the state’s Kirwan Commission, such as expanding prekindergarten, boosting teacher pay, and improving college and career-prep programs.

Democratic leaders in the General Assembly have pledged to enact the Kirwan recommendations, which would cost up to $4 billion in additional spending by the end of a 10-year phase-in. About $2.8 billion is expected to come from the state, with $1.2 billion more to come from local governments.

Ferguson and House of Delegates Speaker Adrienne A. Jones have pledged to raise that money without a broad-based increase to the state’s sales, income or property taxes. That’s left them looking for novel ways to generate money without having a big direct impact on most Maryland taxpayers.

During a lengthy series of hearings Wednesday afternoon, members of the Senate’s Budget and Taxation Committee also began wrestling with other ideas for raising money, including legalizing betting on sports, increasing tobacco taxes and changing how corporations must define their profits and pay their taxes.

Ferguson said taxing digital ads is one way to update the state’s tax structure to accommodate the changing economy.

He said the business of tracking internet users and presenting them targeted ads is a $400 billion worldwide industry. The companies who make that money, he said, should be obligated to help pay for “the costs of civic society” such as public schools.

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“This is the new economy in action and someone has to lead,” the Baltimore Democrat said.

Ferguson acknowledged that no other state in the nation has approved such a tax.

The proposal was met with skepticism from some senators and opposition from companies involved in online advertising.

Several opponents who testified raised questions about how it would be calculated and applied. Others questioned whether it would violate federal laws or the right to free speech.

“Simply put, this is a tax on speech,” said Clark Rector, executive vice president of the American Advertising Federation.

Though no one named names, the belief is that the digital ad tax would apply to online giants such as Facebook and Google that have extensive operations to place ads targeted to internet users’ interests, based on their internet activities and searches.

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Matt McDermott, president of the American Advertising Federation of Baltimore, said the bill seems to aim to “snipe” giant online companies for quick cash, but instead waves a “bazooka” at local companies.

Sen. Guy Guzzone, a Howard County Democrat who chairs the Budget and Taxation Committee, said senators would form a work group to hash out the details of the proposed tax.

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