Why Google’s $172M Deal With California May Fail to Solve the Journalism Crisis

Google’s deal with California: A stopgap measure for journalism support: Google has agreed to commit over $172.5 million to journalism and artificial intelligence initiatives in California, highlighting the ongoing challenges faced by the news industry in the digital age.

• The agreement, negotiated with California Assembly member Buffy Wicks, replaces more complex regulatory and “link tax” legislation that Google had opposed.
• California is also contributing $70 million to journalism initiatives as part of the deal.
• This arrangement may set a precedent for similar agreements between tech giants and other states.

Shortcomings of the current approach: The deal between Google and California represents a short-term solution that fails to address the fundamental issues facing journalism in the digital era.

• The agreement relies on voluntary, tax-deductible contributions to nonprofits, potentially reducing its overall impact on tax revenue.
• The five-year term of the deal raises questions about its long-term effectiveness in supporting journalism.
• Critics argue that this approach allows tech companies to sidestep more comprehensive tax and regulatory policies.

The case for a data tax: A more sustainable solution to support journalism and hold tech companies accountable could be the implementation of a comprehensive “data tax.”

• This tax would target two primary sources of revenue for tech giants: user data mined for advertising purposes and external data sources used for training AI models and content aggregation.
• A data tax could provide ongoing support for journalism, rather than temporary infusions of capital.
• Such a tax would better align tax policy with the significant role tech companies play in the digital economy.

Proposed structure of a data tax: A well-designed data tax could address the current power imbalance between states and large tech companies while providing a more equitable distribution of revenue.

• The tax could be levied based on revenue generated from digital advertising and data ingestion.
• For AI models, the tax could be based on elements such as parameter size, which roughly approximates the complexity and amount of training data used.
• Clear definitions of user data and content ingestion, along with enforcement mechanisms and penalties for non-compliance, would be necessary.

Broader implications for the tech industry: The Google-California deal reflects a wider trend of tech giants negotiating individual agreements to avoid stricter regulations or taxes.

• Similar deals have been struck in Canada and Australia, with tech companies seeking to avoid “link tax” legislation.
• These arrangements demonstrate the industry’s reluctance to submit to comprehensive taxation systems that support journalism and hold tech companies accountable.
• The increasing importance of data for AI development and content aggregation further complicates the issue.

Challenges in implementing a data tax: While a data tax presents a more comprehensive solution, it would face several hurdles in its implementation.

• Defining what constitutes user data and content ingestion for tax purposes would require careful consideration.
• Enforcement and compliance mechanisms would need to be robust to prevent underreporting or evasion.
• The tech industry is likely to resist such measures, potentially leading to legal challenges and lobbying efforts.

The role of public funding: The current agreement between Google and California raises questions about the use of public funds to support journalism initiatives.

• The state’s $70 million commitment effectively adds public funding on top of the subsidies enjoyed by Google.
• This approach may not be the most equitable or sustainable way to finance support for journalism and digital platforms.
• A more comprehensive policy could ensure that tech companies contribute their fair share without relying heavily on taxpayer funds.

Looking beyond short-term solutions: While the Google-California deal provides immediate support for journalism, it falls short of addressing the underlying issues in the digital media landscape.

• The agreement’s reliance on tax-deductible contributions may reduce its overall benefit to tax revenue.
• The five-year term limits its long-term impact on the journalism industry.
• A more equitable and permanent solution, such as a well-designed data tax, could provide sustained support for journalism and other digital platforms while ensuring tech companies contribute their fair share to the public good.