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New York vs Big Tech: Lawmakers Float Data Tax in Privacy Push

Big tech companies like Amazon, Google, Facebook and Apple could soon face a 2 percent tax in New York state for profiting off of consumer data — if a recently proposed bill gains enough support to become law.

While New York is not the first state to propose data privacy legislation, it is the first to propose a data privacy bill that would implement a tax on big tech companies that benefit from the sale of New Yorkers’ consumer data.

Known as the Data Economy Labor Compensation and Accountability Act, the bill looks to enact a 2 percent tax on annual receipts earned off New York residents’ data. This tax and other rules and regulations aimed at safeguarding citizens’ data will be enforced by a newly created Office of Consumer Data Protection outlined in the bill.

The office would require all data controllers and processors to register annually in order to meet state compliance requirements. Failure to do so, the bill states, would result in fines.

As for the tax, all funds will be put toward improving education and closing the digital divide.

“The revenue from the tax will be put towards digital literacy, workforce redevelopment, STEAM education (science, technology, engineering, arts and mathematics), K-12 education, workforce reskilling and retraining,” said Sen. Andrew Gounardes, D-22.

As for why the bill is being proposed now, Gounardes said, “Every day, big tech companies like Amazon, Apple, Facebook and Google capitalize on the unpaid labor of billions of people to create their products and services through targeted advertising and artificial intelligence.”

As a result, he said, “It’s only right that New Yorkers are compensated for their free labor.”

Examples of this free labor include filling out search engine requests, sharing social media updates, filling out CAPTCHA requests and visiting different websites.

“The premise is sound,” Gounardes said. “New Yorkers are providing resources to companies and are not getting a cent in return. If this were an oil company or a factory or any other type of company that profits from work done by individuals, they would be paid.”

However, one industry expert voiced a different opinion about the bill, questioning whether or not the legislation actually addresses data privacy concerns.

“I don’t really think the bill is talking about privacy per se,” Cynthia Burke, a compliance manager at cybersecurity company Capsule8, said. “It doesn’t tell large companies what they can and cannot do in terms of collecting data; rather, all it says is that they are going to be taxed.”

However, Burke said, what the bill does do is open the door to conversations about how big tech companies are using citizens’ data and how these concerns could be addressed.

“I think for the bill to go anywhere, there would first need to be disclosure from Amazon, Google, TikTok and other big tech companies on what data they are collecting on New York residents,” she said. “If it does go forward, it would create hundreds of millions of dollars for the state.”

But would it be enough to curb big tech companies from profiting off New Yorkers’ personal data?

The answer, according to Burke, is not likely.

“Even catastrophic GDPR fines haven't slowed the biggest of tech companies — what’s to say a tax would do anything to curb the data economy as we know it?” she said. “It’s not likely Google would forego the billions in revenue it earns on consumer data, even if it were taxed.”

However, she said, “we have seen something similar in the past with the industrial revolution; it’s just a new context. It would behoove lawmakers to look back and learn from that time to navigate this new data economy.”
Katya Diaz is a staff writer for Government Technology. She has a bachelor’s degree in journalism and a master’s degree in global strategic communications from Florida International University.