A Tax on Silicon Valley Is A Dumb Way to Solve Digital Divide, But Might Be A Smart Way To Protect Privacy.

Everyone talks about the need to provide affordable broadband to all Americans. This includes not only finding ways to get networks deployed in rural areas on par with those in urban areas. As a recent study showed, more urban folks are locked out of home broadband by factors such as price than do without broadband because of the lack of a local access network. The simplest answer would be to simply include broadband (both residential and commercial) in the existing Universal Service Fund. Indeed, Rep. Doris Matsui has been trying to do this for about a decade. But, of course, no one wants to impose a (gasp!) tax on broadband, so this goes nowhere.


Following the Washington maxim “don’t tax you, don’t tax me, tax that fellow behind the tree,” lots of people come up with ideas of how to tax folks they hate or compete against. This usually includes streaming services such as Netflix, but these days is more likely to include social media — particularly Facebook. The theory being that “we want to tax our competitors, “or “we hates Facebook precious!” Um, I mean “these services consume more bandwidth or otherwise disproportionately benefit from the Internet.” While this particular idea is both highly ridiculous (we all benefit from the Internet, and things like cloud storage take up more bandwidth than streaming services like Netflix) and somewhat difficult —  if not impossible — to implement in any way related to network usage (which is the justification), it did get me thinking about what sort of a tax on Silicon Valley (and others) might make sense from a social policy perspective.


What about a tax on the sale of personal information, including the use of personal information for ad placement? To be clear, I’m not talking about a tax on collecting information or on using the information collected. I’m talking a tax on two-types of commercial transactions; selling information about individuals to third parties, or indirectly selling information to third parties via targeted advertising. It would be sort of a carbon tax for privacy pollution. We could even give “credits” for companies that reduce the amount of personal information that they collect (although I’m not sure we want to allow firms to trade them). We could have additional fines for data breaches the way we do for other toxic waste spills that require clean up.


Update: I’m apparently not the first person to think of something like this, although I’ve expanded it a bit to address privacy generally and not just targeted advertising. As Tim Karr pointed out in the comments, Free Press got here ahead of me back in February — although with a more limited proposed tax on targeted advertising. Also, Paul Roemer wrote an op ed on this in the NYT last May. I have some real problem with the Roemer piece, since he seems to think that an even more limited tax on targeted advertising is enough to address all the social problems and we should forget about either regulation or antitrust. Sorry, but just as no one serious about global climate change thinks a carbon tax alone will do the trick, no one serious about consumer protection and competition should imagine that a privacy pollution tax alone is going to force these companies to change their business models. This is a push in the right direction, not the silver bullet.


I elaborate below. . . .

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