In Brief:
- Utah’s state Legislature passed a bill that would tax advertising targeted to individual Internet users, a major revenue source for social media and tech companies.
- Revenue from the tax would be spent on youth sports, literacy and mental health services.
- Tech companies challenged a similar law passed in Maryland in 2021. The lawsuit is still working through the courts.
Utah lawmakers say they’re on a crusade to rein in big tech companies and protect kids from the mental health effects of spending too much time on social media.
Utah Gov. Spencer Cox launched a public awareness campaign about the harms of social media in 2023. The Utah Legislature, led by Cox’s fellow Republicans, passed two laws in 2024, regulating how social media companies interact with underage users and allowing a “private right of action” for families to sue social media companies over harms to children. After the murder of conservative activist Charlie Kirk at Utah Valley University last year, Cox said that social media is “a cancer, and it is taking all of our worst impulses and putting them on steroids.”
Now, the Legislature has passed a bill that would put a tax on “targeted advertising,” a pervasive digital advertising strategy that shows ads to users based on personal data about their location, shopping habits and Internet usage. It’s the kind of practice that makes social media services like YouTube and Instagram profitable. Revenue from the tax would go into a restricted account to fund child literacy programs, youth sports, mental health programs for kids, and adoption and foster care services. Sponsors say the tax would apply to a lucrative practice that companies use to monitor user behavior and mine the data for ad revenue.
“[Tech companies] have no problem monetizing our kids … but they don’t want anything that gets in the way of their profits,” says state Sen. Mike McKell, a Republican who sponsored the bill. “I’m not willing to sit back and let big tech harm our kids.”
Cox has yet to sign the legislation, but McKell, the Senate’s majority assistant whip, says he expects him to. He also expects a legal challenge from tech companies. But he says Utah learned from earlier state efforts to pass taxes on digital advertising.
Maryland is currently the only state with a digital ad tax, enacted in 2021. That tax has been subject to a lawsuit filed by NetChoice, a trade group that has sued a number of states, including Utah, over laws regulating Internet activity. Last year a court struck down a portion of Maryland’s law barring companies from passing the cost of the tax on to customers through a separate fee or surcharge, or disclosing it in a contract. That provision was meant to prevent the tax from burdening Internet users, but the court ruled it violated the First Amendment. A more fundamental challenge to the tax itself — arguing that it violates the federal Internet Tax Freedom Act by discriminating against online advertising — is still moving through the courts.
Maryland’s legislation informed how Utah lawmakers wrote their bill.
“What Utah has done differently is they’ve avoided express language about digital advertising,” says Jared Walczak, a senior fellow at the Tax Foundation, a right-leaning think tank in Washington, D.C.
Utah’s bill instead would tax large businesses that earn money from “targeted advertising” using “individualized data profiles.” In effect, however, the law would still apply only to digital ads, which means it would likely also face accusations of violating the Internet Tax Freedom Act. A broader tax on advertising “could still be really bad policy,” Walczak says, but might be legally defensible. He believes Utah’s bill, despite avoiding some of the explicit language of Maryland’s law, will still lose in court.
And he argues it wouldn’t be likely to reduce the harms of social media anyway. “Taxing digital ads is not necessarily well calibrated to address the issues that lawmakers are worried about,” Walczak says.
Other states have generally held off passing digital ad taxes as they await the final outcome of the Maryland litigation. McKell says he heard all the arguments against the tax during legislative hearings. Taxes aren’t his first choice for policymaking, but they do have “an ability to change behavior,” he says.
“We have a problem that these companies have created, and the tax is really specific on how that revenue is going to be used to address problems created by these companies,” he says.
Utah’s other efforts to regulate social media are moving through the courts as well. Its 2024 Minor Protection in Social Media Act is currently not being enforced pending litigation from NetChoice. McKell says the state is expecting to defend the tax in court.
“There’s a lot of cheese on the line, and [tech companies] know that what happens in Utah happens in other states,” he says.
