What if we taxed advertising?

2 months ago (matthewsinclair.com)

I worry about "tax thing I don't like" policies as then government is dependent on that revenue and now ... you to some extent want that activity to occur otherwise you've got budget issues. Now what is the incentive? Do you adjust taxes to eliminate it or does the state try to keep that revenue stream going?

I also wonder if somehow we're trying to seriously reduce advertising what that does to land of the internet where the users of the internet seem to choose / want "free" advertising based products. I'm not convinced folks just suddenly pay and upending that entire economy maybe a serious net negative.

  • > I worry about "tax thing I don't like" policies

    Equating "things I don't like" with "negative externalities" does not seem like a helpful framing for this discussion. I personally like traveling around the world and eating avocados, but they have substantial negative externalities. I personally dislike watching ballet or eating mushrooms, but they have minimal negative externalities.

    Advertising may very well be something that the author dislikes AND that has negative externalities, but the point of a Pigovian tax is solely to apply a price commensurate with negative externalities, not the dislike.

    > you to some extent want that activity to occur otherwise you've got budget issues

    Perhaps, which is why he mentions "freebates", and why I find revenue-neutral Pigovian proposals like the "carbon-fee-and-dividend" so compelling. The primary purpose is not revenue, it is to ensure the correct price on negative externalities so society can rely on a free market to solve tricky allocation problems.

  • It is not tax "things I don't like".

    It is tax things that has macro dynamic negative externalities.

    And subsidize things that has positive macro dynamic externalities.

  • The thing economists generally say to do, is to take the revenue from Pigovian taxes and use it to somehow offset either the original negative externality (e.g. using tobacco taxes to fund public health measures) or anticipated damage caused by the tax itself (e.g. using carbon taxes to fund public transit). In either case, in theory: if nobody pays the tax, then you no longer need the revenue.

    Not to imply that economists are uniform on this or necessarily correct, but there has been work done here.

  • It could be more a subtle change. Instead of taxing advertising, what about stop advertising costs from being counted as business expenses. You can spend all you want but you can't claim that cost as an offset to revenue. Doing this now amounts to a subsidy on advertising, so just remove it.

  • > you to some extent want that activity to occur otherwise you've got budget issues. Now what is the incentive?

    I was just talking with some friends recently about an instance of this: distilling, which is still federally illegal in the US for the primary reason that it provides a lot of tax income if you charge for licenses and tax sales, which is incredibly frustrating because it's easy and safe to make yourself high-quality liquors at a fraction of the price that you'd pay at the store and have a fun hobby to boot.

    (pedants: please don't bring up safety issues - it's trivial to realize with five minutes and internet access that distilling isn't significantly less safe than many other unregulated activities in the world as a whole)

    • When advertising is taxed/banned, we'll have to resort to making our own dangerous forms of advertising and bootleg them around without the cops catching us.

    • Forget about the safety issues of the distilling itself (and the risks of accidentally creating methanol), I'd be far more concerned with the safety and public-health issues of cheap, unregulated access to high-proof alcohol.

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  • Like how whenever they want to introduce gambling, they always tie it to school funding, as if magically, it’s the only way to pay for schools

  • We could start by not having a bulk rate for ~spam~ snail mail. Charge them double, perhaps. Especially political.

If the goal is to reduce advertising, I don't see this being effective.

Businesses will just continue to advertise, and pay the tax. Because all their competitors have to pay the same tax, it's just a status quo. And businesses will raise the prices consumers pay to make up for the difference.

So ultimately it would wind up being a regressive tax, like tariffs, paid for by people in rising consumer prices.

Taxes can only deter behavior when there are alternatives. But there aren't alternatives to advertising. Businesses advertise because it works, because it increases their revenue.

Also, if taxes did slightly reduce demand for advertising, then the price of advertising would just decrease, that would be the main effect. There would probably be a tiny contraction in advertising space, but not enough that anyone would notice.

The main effect would be to raise prices for consumers, not to reduce ads, because there aren't substitutes for advertising.

  • > Because all their competitors have to pay the same tax, it's just a status quo.

    That may be correct if every company spends similar amounts on traditional advertising, but this isn't true. In reality, such a tax would hit companies with larger traditional advertising budgets harder, and make some companies choose to shift some of their marketing spend to other communication methods.

    For example, I work for a company that has a small advertising budget with no traditional advertising. We have a website, publish papers, and occasionally have a booth at a conference. Some of our competitors have significant advertising presence in trade magazines, social media, news sites, etc. Therefore this tax would impact them more than it would impact us.

    More importantly for the purpose of the tax, it might shift our competitors' behavior. Ad buys that were of marginal utility to the company before would be even less cost-effective so either advertising platforms would lower their prices or the company would not buy the ad. In some cases this lower price would make it no longer profitable for the platform to display, eliminating the ad enteriely.

    • Yes, you're describing the slight drop in demand I was referring to that could occur. And there are definitely other of companies who spend their marketing on things other than traditional advertising.

      But most ads you see are for consumer products. Coca-Cola, cell phones, soap and shampoo, cars, fast-food brands, toys. These don't have anywhere to shift to. Dove soap isn't going to switch to reaching people by newsletter. They'll just pay the tax and pass on the costs to consumers. The vast bulk of advertising simply wouldn't change at all.

      And like I said, even with a slight drop in demand, the main effect would be to lower advertising prices, not reduce advertising space.

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  • I concur. At no point does the article suggest that taxing would reduce advertising, or improve existing advertising in any way.

    Plus, of course, the proposal is simplified, and much hand-waving about the details. Who to tax, for what, when, how much etc are all details needing attention.

    Already exceptions are proposed. Hint - the exceptions will favor big corporate, against the little guy, not the other way around.

  • To your point, I think it would entice regulatory arbitrage, where companies will appear selling "influence positioning" (or whatever the term they come up with) that acts as advertising but hasn't yet been categorized in the eyes of the law.

The UK already does and so does Canada. https://www.gov.uk/government/publications/introduction-of-t...

"The provision of a social media service, internet search engine or online marketplace by a group includes the carrying on of any associated online advertising service. An associated online advertising service is an online service that facilitates online advertising and derives significant benefit from its association with the social media service, search engine or online marketplace."

Google Ads for instance invoices the tax to their customers. https://support.google.com/google-ads/answer/9750227?hl=en-G...

  • This tax was introduced as a straightforward way to actually get tax revenues out of a multi-billion dollar industry that does not come remotely close to paying its fair share of tax in the UK.

    The digital services tax was a limited counter to aggressive tax avoidance by US multinationals. Unfortunately, even though it's peanuts in the grand scheme of things, it's looking like it'll get offered up as sacrifice to the King in Orange.

    UK corporations are expected to pay ~20% corporation tax, individuals pay _substantially_ more on their incomes. We've got a generation that've had to endure continual cuts to public services because "there's no money left", whilst foreign corporations make money off our public virtually tax free.

    Google, Facebook etc., should pay their way or get out of our market.

    • That was the intent, but in reality the tax is fully remitted to Google's customers. I'm a small UK business and it appears on my invoice, so I'm effectively the one being taxed. This is why I object to the campaigners calling for 10% DST. They don't realise the tax is mostly remitted back onto UK businesses, not the trillion dollar giants.

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This post came from this HN discussion earlier this week:

What if we made advertising illegal?

[0]: https://news.ycombinator.com/item?id=43595269#43599667

  • We should outright forbid it in public space. IHMO.

    Also I'd say lets only tax undesirable behaviour!

    So not tax:

    * wages

    * having a house

    * adding value (VAT)

    But so tax:

    * land use

    * polluting

    * packaging (could be part of polluting)

    * accumulating profits at the top

    This idea has some similarities to:

    https://en.wikipedia.org/wiki/Georgism

    • Totally agree on taxing undesirable behavior--everyone complains about 'traffic' and the potential traffic impacts of something. If noise/pollution was taxed appropriately perhaps traffic would be less of a concern. A government needs to get revenue somehow and wages are just a very convenient way to do so. However, with all the modern technology that we have now, I think there are options available that are not being taken (such as fair land use tax with computer calculated values)

  • I love seeing the anti-advertising sentiment bubbling up. Social media addiction, 24 hour political news bubbles, pharmaceutical companies spending more on ads than R&D, consumership-based lifestyles, etc. All of it is driven by advertising being an acceptable business model. And we haven't even touched on the aesthetic crime of fucking ads being pasted on every surface in public.

    But here's a different take: unsolicited advertising is theft. It is the "fractional penny" heist perpetrated by the industrial advertising complex upon all of us, all of the time.

    Hear me out. You have a finite amount of mental attention that you can give in any given environment. Advertising companies are selling access to bits and pieces of this finite resource of yours. Sometimes they do this with your consent in advertising supported products you seek out (e.g. free YouTube or Spotify) and this is fine.

    But often you have not consented to spend your attention on their ads. You probably weren't laying on the beach, staring into the sky hoping to find the phone number of a personal injury attorney being towed behind an airplane. Or the latest weight loss drug plastered on the side of a city bus. Or 15 garbage pamphlets jammed into your mailbox.

    There's a reason all the dystopian, sci-fi media shows the beleaguered protagonist assaulted with personalized ads in holograms and on every surface. Because that is exactly where we're headed just as soon as they figure out how to do it if we don't legislate this shit away.

    • I think it's simpler than that:

      If watching ads is a valid way of "paying" for youtube, then what is the service/benefit you receive for watching ads in the sky?

  • At this point next week there will be an article titled “What if we averted our eyes from advertising?”

    • This is the only inexcusable proposal of the three. The whole point of effective advertising is that you can't escape it, and it penetrates your brain even if you actively resist it.

Lawmakers typically prioritize economic growth, which is driven by consumption, and consumption is driven by advertising. Is there any way around this? I hate having my brain constantly invaded with no means of defending myself.

“isn’t that an argument for iterative policy, not inaction?”

EVERYTHING is an argument for iterative policy. Problem is the political system is presently incapable of it.

We have to upgrade democracy first. We can tackle any challenge once politicians have proper incentives.

The solution to ads may lie in stricter advertising rules. For instance, banning ads designed to manipulate rather than inform and setting standards for this criteria. Or even banning some advertising practices outright that are common methods for coercive or subtle influence. Imagine if a mouthwash commercial couldn't show an isolated women clearly stressed out about her breath to subtly ingrain an insecurity in their target audience.

A better idea is to simply further regulate advertising. We already have many rules about advertising. We used to have more we got rid of, most famously Rx drug ads weren’t allowed, but now they are. I’m sure there are many ideas people have for how to do this. Personally I would just like to see us ban ads for Rx drugs, OTC snake oil, gambling, alcohol, and cars. Maybe also fast food and junk food. It worked so well for tobacco. Don’t need to ban the products, just ban ads for them.

Solution is straightforward: Separate the advertising service from the platform, so that the same corporate entity cannot run both.

  • Hollywood already does this, when your movie gets greenlit you go into debt with the other arm of the company for marketing.

    • In this case, we would require it to be a separate company altogether. Could there still be collusion? Sure, but it would introduce a misalignment of profit motives, which would introduce competition between the platform and the advertising service.

Agree that advertising can be harmful, and in abstract the idea of taxing it as a sort of cognitive pollution seems sensible.

However, I'm skeptical that the US would adopt such a complex and pro-consumer regulatory framework. Perhaps once the EU goes through a few iterations we'll get a watered-down version here.

The kind of advertising you hate the most is almost always paid for and done by advertising agencies that have to pay the income tax. So it kinda is already taxed.

A tax is a price.

A fine is a price.

If it's just a price, it's acceptable to do it. People who can afford it will do it. People who profit more from doing it than they're fined or taxed will do it forever.

The only way to stop a harm is to have a population that's on board with criminalising it, a law system that's empowered to stop it and prosecute it, and have a chain of escalating remedies all the way up to physical prevention (e.g. incarceration, or corporate death penalty)

We don't let people shit in the river. We don't let companies shit in the river. We know the harms. Advertising is shitting in your brain.

chuckles while seeing this posted on Hacker News, meanwhile a "Join us for AI Startup School this June 16-17 in San Francisco!" message appears at the bottom

in any case, ads are speech, and speech is protected. funny seeing this litigated over and over again here. it's actually concerning how many people on here want to ban speech because it's paid for.

Advertising is not the problem. The problem, the issue is human civilization is facing a situation we've never dealt with before, and that situation is all the ramifications of our population size.

The human race and every individual of that race has no background to understand how to operate in an environment where the magnitude of the number of others that can do everything they can do, can do it better, and for less salary creates a new situation we as a society do not know how to manage.

The situation has created billionaire oligarchs with more wealth and power than any individual that has ever lived. These powerful individuals are without the foundation nor maturity to navigate themselves without large amounts of self serving immaturity.

We need to, as a group large enough to make a cultural difference, acknowledge that all our evolutionary preparation and modern educations do not prepare us for what we face today, and our institutions we use to govern our civilization are not prepared for the power weld by modern oligarchs. They have the resources to perform selfish and shortsighted changes to all of society for their benefit alone. If history teaches the human race anything, situations such as this create monsters. We need to acknowledge we are creating monsters and they are our leadership class.