Last year, the Tax Committee in the Minnesota Senate, where the DFL holds a one seat majority, passed a bill that would have imposed the first “social media tax” in the nation. It didn’t go anywhere with Republicans holding half of the seats in the House, but no bad idea ever truly dies, and it is back again this session.
What?
SF 5052 would impose a tax on social media companies ranging from 10 cents to 50 cents per “Minnesota consumer,” depending on the platform’s size.
You might have spotted a problem already. Most social media accounts do not require the user to provide a physical address, so the Department of Revenue would have to rely on social media access from Minnesota IPs. As a result, companies could be hit with a bill for customers who are only passing through Minnesota. To jump ahead for a moment, why should Meta pay a tax to the state of Minnesota to finance workforce development or mental health treatment based on a user who is resident in South Dakota and was on his or her way to Chicago?
Why?
Besides the DFL’s apparent mania for raising taxes anywhere at anytime, what is the purpose of this tax?
Gov. Walz proposed an identical tax in his recent budget. In his State of the State speech last week, he said:
I’m asking you to join me in getting our state ready for the economy of the future.
I don’t want Silicon Valley deciding how artificial intelligence and other new technologies will impact our small towns and working families.
I don’t want technocrats like Peter Thiel and Sam Altman and—yeah—J.D. Vance determining who wins and who loses.
Nobody doubts that the rise of AI is good news for tech companies, who are making record profits.
But as industries, business practices, and jobs are transformed by innovation, we need to take bold steps to protect and prepare workers for what’s coming.
That’s why I’m proposing a social media tax—not on users, but on the big tech companies making billions off of our data.
I want to use that revenue for workforce development initiatives designed to get Minnesotans ready for the age of AI and other emerging technologies.
This marks a change from when the tax was proposed last year.
Back then, the social media tax was offered, first, as a Pigouvian tax. These are taxes imposed on activities that generate negative externalities, such as pollution, to either reduce them or compensate those harmed. But social media also has positive externalities and different platforms — Instagram and Goodreads, for example — will have very different balances of good and bad. The bill takes no account of that.
Second, the social media tax was compared to taxes on mineral extraction. There, the idea is that “the earth is a common treasury,” so we are all entitled to a cut of the proceeds derived from its exploitation. But you, “Minnesota consumer,” are not a common treasury. Your data is yours, not the common property of the state of Minnesota, and if you choose to barter it for entertainment, you have that right.
Either way, the revenue from this tax has been earmarked for both workforce development and treatment for mental health. The social media tax is the classic solution in search of a problem.
Who?
KSTP dutifully asserts the DFL talking point that the tax “would be imposed on the social media companies, not individuals who use the platforms.” “This tax will generate millions in needed revenue for our state, and importantly, not one single Minnesotan will pay a penny of it,” Tax Committee Chair Sen. Ann Rest (DFL) said. “Not one cent.”
This is absurd. As I wrote last year:
It ignores the crucial point of tax incidence, which is who actually bears the burden. When tariffs — which are taxes — are imposed on Canadian steel imports, for example, we do not say, “No Minnesotan will pay a dime; the steel importers are going to pay for it, you have to be a rich steel importer to complain about these tariffs.” We say, as I did last month, that the burden of this tax will be borne by:
…some combination of the Canadian producer in the form of a lower price, the American importer in the form of a lower profit, and the American consumer in the form of a higher price. Tax incidence — who bears the burden — matters. As a wise man once said, “There is no such thing as a free lunch.”
In the case of “free” services such as those provided by most social media companies, this price will take the form of either an actual price or a reduction in services. “This could lead companies to scale back free or widely used services like Gmail, Google Maps, YouTube and Facebook, tools Minnesotans rely on every day for connection, work and community engagement,” said Kouri Marshall with the Chamber of Progress, a trade group representing tech businesses. No doubt it would.
“Elon Musk will pay for it” is, it seems, the DFL’s version of “Mexico will pay for it.” Sen. Rest is surely far too knowledgeable in tax matters to actually believe the things she is saying.
Indeed, as Figure 1 shows, in its “2026 Minnesota Tax Incidence Study,” the Minnesota Department of Revenue calculates that 46% of the burden of a hike in the Corporate Tax falls in “MN Consumers,” 27% on “MN Labor,” 21% on the “Federal Government,” and 6% is exported. Basically none of the burden falls on “MN Capital.”
Figure 1
This proposal is probably doomed with the House still split 67-67. But history shows that it will simply slink back into the shadows, waiting to emerge when there is a more accommodating legislative environment.