October 19, 2022
Photo: Jonathan Newton /The Washington Post via Getty Images)
Hello, and welcome to Protocol Policy! Today I’m taking you inside a world of sex, mystery, and revelation. Lol, just kidding, we’re talking about corporate taxes, but they’re the kind that could cost you money and help pay for your children’s education. Plus, The Wire backs down in India, Meta has to put a “for sale” sign on Giphy, and employee attrition is eating into Amazon.
A taxing fight
A Maryland court struck down the state’s first-in-the-nation tax on Big Tech’s digital ads. Proponents had hoped the levies, as high as 10% on the largest companies, could generate $250 million in education funding. Instead, the ruling could well mean states that had been eyeing the measure — and the profits that Meta and Google bring in — have to go back to the drawing board.
From a political standpoint, there was a lot to recommend a digital ad tax, especially one that targeted the biggest companies.
To many people, it just feels like the public deserves a cut for its unwilling part in the ecosystem, as California Gov. Gavin Newsomproposed back in 2019.
Newsom never went through with it, but he was hardly unique.
Political appeal aside, however, critics (often on the right) derided the basic soundness of the policy. Opponents especially disliked the law’s vague definition of advertising and the possibility that implementation would often reach outside Maryland.
Ultimately, the Maryland judge said the state’s digital ads tax was illegal.
There are major lingering questions about how lightly states have to tread when trying to regulate the internet, because Congress is generally supposed to be in charge when an industry criss-crosses all the states.
In short, states that were eager to tap into a big pool of much-despised corporate revenue now probably need to find other ways to bring in cash.
Regulating tech is notoriously tricky, which is why Congress has stalled and states have gotten to play around with their own ideas. Perhaps a simple tax seemed to Maryland lawmakers like a faster way to bring tech low and shore up budgets than mucking around with content and the arcane rules of antitrust. There may be more favorable court rulings out there for the state, or for another state that tweaks the idea based on the judge’s concerns. The decision is still a reminder, though, that when it comes to tech, even easy ideas can often prove terribly difficult.— Ben Brody (email | twitter)
The Federal Trade Commission will consider whether home appliance manufacturers should include repair instructions on equipment. The move is intended to “strengthen consumers’ right to repair damaged products, without the need to go back to the manufacturer.”
A chip lobbying group doesn’t think the Chips Act gave them enough money for R&D. In an interview with POLITICO, the COO of NY Creates aired concerns over the “long-term sustainability” of the R&D plan that currently allocates $11 billion for subsidies. The group is understandably cautious about going to Congress and asking for more before proving it can do something with the initial infusion.
The Inflation Reduction Act tax credits could be a game changer for electrified trucks and vans. Analysis from Energy Innovation showed that the tax credits — $7,500 for light- and medium-duty vehicles and $40,000 for heavy-duty trucks — could double or triple the share of electrified vehicles in truck and van fleets by 2030.
Valuations have become less hype-driven and more realistic; the amount of time spent on due diligence has increased substantially; and every founder needs to directly, clearly, and concisely answer the question, “Does this project have any real-world utility, and does it create economic value?”
Protocol’s Climate team has a look at nonprofit Terraset, which exited stealth mode on Tuesday, as it plans to help channel private philanthropy into carbon dioxide removal services.
From our “How I Decided” series: How AI critic Meredith Whittaker decided to leave the FTC to become the president of Signal.
The U.K. affirmed its order that Meta has to sell Giphy over competition concerns. The original ruling from last year, which the company had appealed, excited antitrust reformers for its close scrutiny of a smaller Big Tech deal.
Japanese regulators want to loosen crypto regulations. The Japan Virtual and Crypto Assets Exchange Association could allow companies to list coins without going through the country’s full screening process as soon as December.
There’s another chapter in the bizarre saga between Meta and Indian digital news outlet The Wire. On Tuesday, The Wire said it would withhold the stories it published alleging Indian politicians in the ruling BJP party had backdoor access to Meta platforms. Meta denied those allegations and said, “We hope that The Wire is the victim of this hoax, not the perpetrator.”
Apple halted plans to source flash memory from a Chinese manufacturer in response to the latest U.S. export controls,according to Nikkei Asia.
EU officials anticipate a wave of Big Tech lawsuits,according to Bloomberg. Since the Digital Markets Act and Digital Services Act are set to go into effect next year, EU digital platform regulator Gerard de Graaf said the companies are likely to sue — though de Graaf also said he favored a collaborative approach.European ecommerce companies want the European Commission to take action against Google’s shopping business, based on the EC’s 2017 finding that Google abused market power in the shopping space.
Internet service providers in several cities charge higher rates for worse service in predominantly Black and Latino neighborhoods than in nearby whiter, higher-income areas, an investigation by The Markup found.
$8 billion: That’s how much money Amazon estimates it lost annually due to employee attrition, according to a leaked January 2022 report obtained by Engadget. Voluntary attrition occurred twice as often as involuntary attrition, according to the report, and “only one out of three new hires in 2021” would remain at Amazon beyond 90 days.
The Biden administration is planning for ways to avoid a run-in between the U.S. president and Russian President Vladimir Putin at the upcoming G-20 summit in Indonesia, according to POLITICO. U.S. officials also reportedly expect other Western leaders to avoid Putin. At the same time, U.S. officials are hoping to set up a meeting between Biden and Chinese President Xi Jinping.
The VC correction is proving once again that valuations are not an indicator of success. While money continues to flow, the crypto winter and VC slowdown have forced even the most committed Web3 venture capitalists (and their investors) to proceed with more caution.
Thanks for reading — see you Friday!