A Tax on Data Could Fix New York’s Budget
Originally published in
Wall Street Journal
For decades, New York City has been plagued by two seemingly incompatible phenomena: soaring inequality and skyrocketing government spending. Some 43% of the city’s families are either in poverty or “near poverty”—that is, earning less than 150% of the poverty level. Meanwhile, an increasing tax burden on working New Yorkers hasn’t been enough to reverse years of chronic underinvestment in education, health care, housing and transit.
This pandemic has laid bare the ugly truth of what’s broken in New York. Nothing lets in the sunlight like the $20 billion hole Covid-19 has blasted through the city and state budgets.
Because working New Yorkers face enough taxes, the task is to find new revenue sources. The first place to look is the data economy, which cities and states have failed to harness properly for decades. Every day, tech companies—from big players like Amazon, Apple,Facebook
We are working on a legislative plan to create a data sales tax that would, for the first time, capture the value of user data that companies buy and sell for profit in New York.
Our proposal’s framework has four parts. First, we need to quantify the amount of data generated by New Yorkers and commercialized for profit. Second, we must create a regulatory process requiring entities that sell or transfer New Yorkers’ personal data for commercial purposes to register and disclose their transactions. Third, we need to calculate the appropriate tax—a transaction fee or percentage of net revenue. Fourth, revenue has to be apportioned between state and local governments to support desperately needed public investments.
This idea has momentum: California Gov. Gavin Newsom proposed a “data dividend” in 2019, and a 2018 Vermont law created a data-broker registry and new regulations.
What’s the value of user data? Because of limited transparency, no one knows. But this data is the foundation of the world economy: PricewaterhouseCoopers’s 2019 survey found that 94% of global CEOs considered data on customer and client preferences and needs to be “critical” or “important” to their companies’ success. Data brokers, third parties whose business is to sell consumer information, are estimated to garner $200 billion a year in revenue.
As Americans spend more time online during this pandemic, data-reliant companies profit. They have monetized search histories, photo uploads, clicks and even the contents of emails. To add insult to injury, users are told that free access to tools like email, apps and social media is compensation enough.
A stronger and more equitable New York could emerge from the Covid-19 crisis if legislators take the logical step of allowing the public to recapture the true value of its digital capital via new tax revenues to fund vital services.
Messrs. Adams and Gounardes, both Democrats, are respectively, Brooklyn’s borough president and a New York state senator.
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