Democratic lawmakers in California and Minnesota want to tax social media companies to raise money for youth mental health services and other public programs.
Sponsors of the social media tax bills are pitching them as a win-win: a new source of revenue that also helps rein in platforms such as Instagram and TikTok.
The bills come as lawmakers in many states are seeking to plug budget holes this session, and after years of trying to better protect minors from harmful online content.
“While the digital economy powering social media grows exponentially in revenue and profit, it’s taxpayers that are currently holding the bag on the repercussions,” California Assemblymember Josh Lowenthal (D) told the Assembly Privacy and Consumer Protection Committee last week.
Lowenthal’s bill would tax an unspecified share of social media companies’ gross receipts from selling advertising in California and use the revenue to fund youth mental health services and research.
He said the tax would raise money to mitigate “the impact that social media is wreaking on this anxious generation” — name-checking “The Anxious Generation,” a bestselling book by social psychologist Jonathan Haidt that blames excessive smartphone use for rising rates of youth depression, anxiety, self-harm and suicide.
Business groups and some Republican lawmakers oppose the tax hikes. They say targeted taxes on social media companies would violate federal e-commerce protections and free speech rights, raise costs for businesses and consumers and scapegoat tech companies for a complex crisis.
Taxing social media companies to fund youth mental health services “creates a false narrative that social media is the culprit here, when the issues around mental health are so much more complex,” said Amy Bos, director of state and federal affairs for NetChoice, an industry group that advocates for tech companies.
Bos testified against a Washington bill that would have raised the state’s major business tax — a gross receipts tax — on social media companies to fund youth mental health services. The bill did not advance beyond its first committee this session.
“To be quite frank, bills that would impose a new tax are fairly ridiculous,” Bos said.
Lawmakers nationwide over the past five years have floated various ideas for taxing tech companies. Some of the proposed bills would tax all digital advertising revenue. Others would tax only social media companies’ advertising revenue. Still others, modeled on severance taxes, would tax companies based on the number of in-state users whose personal data they collect.
Bills have been sponsored by both Democrats and Republicans. Their rationale has included punishing tech companies for content moderation policies, raising money for news outlets struggling financially, and simply making tech companies pay more to fund public services.
Prominent economists have argued that taxing digital advertising would force social media companies to move away from a click-driven business model that encourages the spread of misinformation and harms mental health.
So far, only Maryland has enacted such a tax. Lawmakers in 2021 approved a tax on a portion of large corporations’ digital advertising revenue in Maryland over former Gov. Larry Hogan’s (R) veto.
Companies and business groups swiftly sued to block the tax, arguing that it violates the U.S. Constitution and a decades-old federal law that prohibits governments from taxing online businesses at a higher rate than offline businesses.
The legal fight has not prevented the state from levying the tax. It has raised over $327 million since April 2022, according to the state comptroller’s office.
Rhode Island Gov. Dan McKee (D) and lawmakers in Massachusetts, Michigan, Montana and New York have proposed taxing digital advertising this year, in addition to the more targeted social media tax proposals.
Minnesota Sen. Ann Rest (D) and Rep. Aisha Gomez (D), the chairs of the House and Senate tax committees, have each sponsored legislation that would tax social media companies with more than 100,000 Minnesota users based on the number of state residents companies collect data on.
Collections would flow into the general fund, the state’s main account for funding public services. The tax would raise about $100 million a year starting in Fiscal Year 2027, according to the state Department of Revenue. Minnesota’s FY 2026 begins on July 1.
Rest said she found the idea of taxing out-of-state companies appealing, as lawmakers try to close a long-term deficit, and she plans to include the tax in the Senate omnibus tax bill.
Gomez in a recent hearing criticized social media platforms for enabling bullying and misinformation. “This is an attempt to acknowledge that these companies are potentially damaging our children,” she said of the proposed tax on data mining.
It is politically difficult to raise taxes, Lowenthal acknowledged during the recent California hearing. But the state will need more money to fund mental health services as the Trump administration cuts federal health care funding, he said.
“The money is going away, while the demand for these things is growing exponentially,” he said.
The privacy committee approved the bill. It now moves to the Assembly tax committee for further consideration.