There is widespread agreement that social media has become a major social problem. The original hope was that Facebook, Google, Twitter, and similar products would help people connect and encourage more decentralized forms of human communication, such as sharing local news. What has happened instead is damaging and dangerous. Social media poses serious threats to mental health, with dangerous impacts on young people in particular. Social media facilitates, and may itself encourage, political radicalization and all forms of extremism, including violence. And the structure of social media today serves as a major brake on more positive forms of technology development across the entire economy. Digital advertising-based ecosystems do not encourage paths of innovation that will help citizens, workers, or anyone outside a small techno-elite.

Banning social media would not work in any political system. But in the US and other industrial democracies, the policy consensus allows imposing excise taxes (“sin taxes”) on goods and services that are bad for our health or on corporate actions that are considered deleterious to the economy.

Thus, the best way forward is to impose a flat tax on digital advertising revenue, set at a high rate above some low threshold of revenues. This tax should be paid on digital ad revenues, not income (or profits), because it is too easy for these multinational companies to hide profits in low tax offshore jurisdictions. Obvious targets for this tax include media and tech behemoths like Google/YouTube (Alphabet), Facebook (Meta), Amazon, Snapchat (Snap), ByteDance (TikTok), and Twitter (now X). But smaller media organizations, including news outlets such as the New York Times, should also be discouraged from manipulating readers.

To be very clear, this tax would only be paid on digital ad revenues; it should not be levied on subscription income or other revenues (e.g., pay-per-view). The over-reliance of social media companies on digital ad revenue has bolstered a business model that incentivizes grabbing and keeping people’s attention at all costs. With the arrival of powerful Artificial Intelligence (AI) tools, tech and media companies have an obvious incentive to greatly increase the effort they put into manipulating consumers. The goal of our proposed digital ad tax is to push all forms of media/communication away from an ad-based business model and toward subscriptions, where revenues are instead dependent on the sustained quality of content and user experience.

This article was originally published in the Network Law Review on March 25, 2024. It has been reprinted with permission from the publisher.