Senator Glazer’s bill would raise $500 million in tax credits to help revive local news
Doesn’t consult at least four local news publishers in his district before developing legislation
SACRAMENTO – A data extraction mitigation fee on major Internet corporations would raise $500 million to fund employment credits for news organizations across California under legislation Senator Steve Glazer, D-Contra Costa, outlined Wednesday at a press conference. Joining Senator Glazer were news publishers representing hundreds of community, and ethnic outlets.
Amid the backdrop of newsrooms continuing a downward spiral with staff layoffs, cutbacks in resources or outright closures, Senator Glazer said “we must create a new framework to ensure that newsrooms keep our citizens informed and democracy accountable to the people.”
The bill, SB 1327, is co-authored by Senate President Pro Tem Mike McGuire, D-Santa Rosa, and Senators Catherine Blakeslee, D-Encinatas, Steve Padilla, D-San Diego, and John Laird, D-Santa Cruz.
Senator Glazer’s proposal would create a data extraction mitigation fee on the largest online companies, or platforms, with a minimum of $2.5 billion in revenues. The Data Extraction Mitigation Fee will be based on the value that online platforms derive by extracting personal and economic data from those who visit the company’s web pages.
“News organizations and their advertising revenues have been hollowed out by these online platforms,” Senator Glazer said. “They should mitigate this damage and this new bill will do exactly that.”
The data extraction mitigation fee closes a loophole that allows online platforms to avoid taxation on the value of the barter in which they engage with customers who, in effect, trade access to their personal data for the opportunity to use a website. While this kind of economic relationship has helped fuel innovation and access to information, it has also created what economists call “negative externalities” – or harm to third parties who are not directly a part of that exchange.
In this case, the harm is being done to local news organizations and, more broadly, to all Californians who depend on independent local news coverage of events that affect their daily lives and the democratic form of government – the foundation of our society.
“You cannot have informed voters if there is no one to tell them what their government is doing,” said Senator Blakespear. “We’ve seen the journalism industry devastated in recent years, and we need to do something about that. SB 1327 is a smart, sensible way to fund local journalism.”
Unofficial estimates indicate that a fee level equivalent to the current statewide sales and use tax rate could generate almost $1 billion per year. Of that amount, 39.5% would go to K-14 education as required by Proposition 98 and 1.5% would go to state budget reserves as required by Proposition 2.
In addition to the constitutional requirement to use a portion of the fee revenue for education and budget reserves, some of the revenue would also go to backfill the state’s general fund for revenue lost when the companies deduct the cost of the fee as an expense on their income tax returns. Some of the money would also go to the Franchise Tax Board for administration and collection costs. That would leave approximately $500 million annually to support local journalism.
While Congressman Mark DeSaulnier held a Zoom meeting with local news publishers in Contra Costa County to provide input on his proposed federal legislation in 2021, neither Glazer nor his staff reached out to at least four publishers in the county for input on his bill before developing it. They include Tamara Steiner, publisher of the Concord and Clayton Pioneer, Mike Burkholder, publisher of ContraCostaNews.com, Greg Robinson, publisher of The Press covering Brentwood, Oakley and Discovery Bay, and Allen Payton, publisher of the Antioch Herald and Contra Costa Herald.
As he did with DeSaulnier’s bill, Payton twice asked the state senator if he would include an exception in the tax code to allow non-profit owners of local media to continue endorsing or opposing candidates and ballot measures, and publishing editorials. But that was not included in the state legislation.
However, Glazer did gather support from other news organizations and sought their input prior to announcing his legislation.
Steve Waldman, president of Rebuild Local News, a nonpartisan, nonprofit coalition of more than 3,000 locally-owned and nonprofit, community-based newsrooms, said the legislation would be a major breakthrough for the news industry – and for communities that are starving for local news.
“We vigorously applaud Sen. Glazer’s proposed local news employment credit, which would truly revitalize community news in California,” Waldman said. “It is a transformative proposal. It would dramatically improve the capacity of newsrooms to cover their communities and is especially attentive to the role of medium and small-sized outlets.
Waldman added: “An employment credit places the incentives in the right place: hiring of local reporters. It’s non bureaucratic. It helps for-profits and nonprofits, print, digital and broadcast, urban and rural. It’s future friendly so new innovators can plug in too. And it does all this while being compatible with the First Amendment and the need to protect the editorial independence of news outlets.”
Much like mitigation fees imposed on companies that put chemicals into the environment to make their products or develop projects that burden our roads and schools, this fee assigns the cost of saving local journalism to those firms whose economic activity is causing the news industry’s demise.
The program would also distribute at least $25 million annually for non-profit local news organizations that don’t benefit from tax credits. Half of that amount would be reserved for those news organizations with fewer than 10 full-time employees. Additional funds would be provided to journalism training programs.
To qualify for the tax credit, news organizations would have to have their primary circulation or distribution in California and their online news primarily consumed within the state. They would publish in the current and previous year and carry media liability insurance. Broadcasters would have to be licensed by the Federal Communications Commission to broadcast in the state to claim the credit.
All qualifying news organizations would be eligible for tax credits based on the number of working journalists they have, the credits increasing with every new hire. News organizations that aren’t profitable would be eligible for tax refunds, as would non-profit news organizations.
Matt Pearce, president of Media Guild of the West, said in a letter of support that the bill hits the right tone in its support of smaller publications and outlets.
“The journalism jobs tax credit is well structured, nondiscriminatory in a way that avoids government favoritism, and incentivizes local journalist employment,” Pearce wrote. “Smaller publishers with fewer than 10 employees – which includes many of California’s ethnic media publishers – would, appropriately, receive a slightly larger share of support than larger newsrooms. Freelance journalists are appropriately recognized and economically supported at a level that would not incentivize workforce fissuring. Employers that provide benefits to their employees would receive more support than those that didn’t.”
Laura Rearwin Ward, publisher of the Ojai Valley News in Ojai, CA near Santa Barbara and Ventura, praised Senator Glazer’s proposal to fund small news publications through tax credits and a data mitigation fee.
“Senator Glazer’s bill gives support to those most in need — California’s print and digital local, independent, and ethnic media,” Rearwin Ward said. “And the data mitigation fee appropriately focuses on large online platforms, such as Google, which profit from the use of content they do not create, and user data they have utilized in a one-sided barter arrangement. This fee will mitigate the harm done to the California news industry through loss of advertising revenue. This fee closes a loophole that has allowed online platforms to avoid taxation on the value of that barter. The visible damage to California is clear to see — huge losses in professional local news reporting, resulting in news deserts and ghost papers.”
Lance Knobel, CEO and co-founder of Cityside Journalism Initiative, the nonprofit that publishes Oaklandside, Berkeleyside and Richmondside, said the legislation could be a game-changer.
“Senator Glazer’s local news employment credit tackles the core problem for local journalism in California: how can we sustain and even increase the number of reporters and editors working in our community? If passed it would be truly transformative for independent local news organizations like ours,” Knobel said.
Ken Doctor, Local Founder and CEO of Santa Cruz-based publication Lookout, said the proposed tax credits would be a critical lifeline for local news organizations.
“The best solution for California’s local news crisis is simple: more experienced journalists offering trusted and trustworthy reporting to and for communities up and down the state,” said Doctor, also an analyst with Newsonomics. “Sen. Glazer’s bill recognizes that payroll tax credits are the best way to fund such a revival, without having the state pick winners or losers. As the legislature debates how to fund such credits, the focus on them is the one essential going forward.”
“We have seen a dramatic devastation of the news eco system, and with it a coarsening of our politics that have led many to worry whether our democracy can survive,” Senator Glazer said. “In so many cases, stories are not being covered in communities, large and small. We often don’t know what politicians and other community leaders are doing – many of the checks and balances have vanished – because nobody is there to cover them. We want to restore accountability and strengthen our democracy by reviving newsrooms.”
Allen D. Payton contributed to this report.
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