Here comes the iPad tax

June 7, 2010

It’s almost as dodgy a notion as nuking BP’s gusher. The U.S. Federal Trade Commission is mulling ways to subsidize the flailing news industry. Paying for it could involve head-scratchers like taxing iPad sales. What the media industry needs is innovation not intervention.

America’s struggling newspapers might like a $35 billion-a-year cash infusion. They have historically drawn 80 percent of revenue from advertising. But Internet competition — from Google to Craigslist — has halved that since 2000. Classified ad revenue alone has plunged to $6 billion from $20 billion.

But the FTC’s “possible policy recommendations” draft paper seems out of sync with a nation wary of more government bailouts and spending. Among the various subsidies: a program to pay young people to work at small-town papers. Federal funding for public radio and television might get a boost from $400 million a year to $7.5 billion, matching the per-capita spending level of Canada. Newspapers could get a tax credit for every journalist they hire. Taxpayers could also elect to donate $200 of their federal income taxes to industry non-profit organizations. (Wisely, no dollar estimate for that is given.)

In this age of austerity, all that spending would at least be paid for. Radio and TV broadcasters would be taxed up to $6 billion a year. A 2 percent sales tax on TV advertising would bring in as much as $6 billion. A 3 percent tax on monthly mobile phone service would be good for another $6 billion.

Then there’s a 5 percent tax on consumer electronics – the iPad levy – which could generate $4 billion. As if all this money weren’t enough, changes to copyright law would make it harder for search engines to make use of newspaper content.

The trouble with all this, is that government support for Old Media at the expense of New Media seems inconsistent with also advocating cutting support of Old Energy (oil) in favor of New Energy (wind and solar.) Instead of addicting newspapers to government handouts — which would also raise issues of journalistic independence from the state – it would be better to keep the playing field level.

New business models will continue to emerge and evolve, especially as the economy and ad climate improves. Journalism has a future even if traditional newspapers may not.

No comments so far

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see