Digital ad tax plan prompts discussion as impacts remain unclear

By Jim Talamonti | The Center Square
The Center Square

(The Center Square) – A digital advertising tax is up for discussion in the Illinois legislature, but opponents say big tech companies would not be the only ones affected.

The Senate Revenue Committee heard testimony on Wednesday evening about a proposed 10% tax on total revenue from digital advertising, if that total exceeds $150 million.

State Sen. Robert Peters, D-Chicago, filed Senate Bill 3353 earlier this year.

“It is in this moment and this time, as we have conversations about this budget and the next one, for us to start holding the richest of the rich companies that are making money off of our personal data, in some level, accountable,” Peters said.

Ramiro Hernandez, vice president of public policy and strategy with the Illinois Chamber of Commerce, said the tax would not only affect big tech.

“Senate Bill 3353 is a largely unworkable form of taxation that risks ultimately impacting numerous consumers in the state of Illinois,” Hernandez told the committee.

Gov. J.B. Pritzker said in his budget address on February 18 that a social media platform fee would generate $200 million a year to support public education.

Megan Stokes, state policy director at the Computer & Communications Industry Association, said SB 3353 has an extreme tax cliff where a minimal increase in revenue could trigger millions of dollars in tax liability.

“This creates an extraordinary sharp cliff effect that can discourage growth and create instability and might actively discourage investment and growth in Illinois,” Stokes said.

Stokes said the bill risks violating the Commerce Clause and the Federal Internet Freedom Act.

Jeremy Rosen, senior strategist for policy at Workers Center for Racial Justice, said revenue outside of Illinois would not be taxed.

“I think we’re able to quite well and quite properly track what activity is occurring here in Illinois. We’re going to be able to tax that, and we’re not going to tax activity that occurs outside the state,” Rosen said.

The proposal remains in the Senate Revenue Committee but could be included in a budget bill before the end of the legislative session May 31.