Utah looks to tax social media companies that collect user data for specialized advertising

Utah may implement a tax on targeted advertising — a digital marketing strategy that delivers catered advertisements to users based on data about them collected by companies online — in a move supporters say aims to protect children from being exploited by addictive social media platforms.

Sponsored by Senate Majority Assistant Whip Michael McKell, R-Spanish Fork, SB287 would also use tax revenue from the bill to fund programs that help Utah’s youth, like after-school activities and mental health assistance. After passing the Senate last week, it’s headed to the House for consideration. 

“In today’s marketplace, children’s attention is being treated like an asset to be extracted, optimized and sold,” McKell said on the Senate floor. “Utah will not stand by where our young people are treated as data points and revenue streams.”

The bill would create a 4.7% tax on companies if they generate at least 50% of their revenue from targeted advertising. It would only affect larger companies, as they must generate more than $1 million from targeted advertising revenue in Utah, and $100 million from the advertising strategy outside of the state. 

“Over the past decade, something about our children has changed. Disruptive sleeping, declining attention, raising anxiety and earlier exposure to harmful content. These trends did not occur randomly,” McKell added. “If we’re successful, (the revenue) goes to child literacy programs. It goes to youth sports and recreation, youth volunteerism programs, mental health programs and services.”

Addictive social media platforms

Social media can be extremely addicting for some users, especially adolescents, according to The National Library of Medicine. Meta — the parent company of Instagram and Facebook — is currently facing a landmark lawsuit in California, where prosecutors allege the company intentionally made their platforms addictive. 

“The facts are pretty damning, and it’s clear that Meta was very much aware of the addictive nature of their product,” McKell said, referencing the California lawsuit. “They had a chance to do something about it, and they chose not to.”

Sen. Lincoln Fillmore, R-South Jordan, joined in McKell’s criticism, describing social media as “addictive, harmful services.” 

“One day we’ll talk about social media companies the same way that we talk about tobacco companies today, and I think that’s already starting,” Fillmore said on the Senate floor. “They provide an addictive and harmful service so that they can sell us to other companies. We are the product.”

The National Library of Medicine’s report found that excessive social media use correlates with declines in mental health — including heightened anxiety and depression — worse sleep patterns, lower cognition and a shorter attention span, among other things. They warn these negative side effects disproportionately impact adolescents. 

Funding child literacy programs

The bill directs tax revenue from targeted advertising be placed in a restricted account that can only be used for “child literacy programs,” which include youth sports or recreation, youth volunteerism, mental health programs and services for children, and adoption or foster care services.

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Sen. Luz Escamilla, D-Salt Lake City, described the bill as “responsible” and “transparent,” emphasizing it seeks to invest in Utah’s youth while also protecting them. 

“It’s bills that are focusing on protecting our more vulnerable populations and having a really explicit description of where those tax funds are going to go (that are) the right approach,” she said on the Senate floor. 

“This is proposing to tax an addictive, harmful service, and instead subsidize mental health services (like) parks, after-school activities, things that are, in fact, very good for children,” Fillmore said, emphasizing that he’s “not a fan of tax increases” but supports the bill. 

Opposition to the bill

Some argued SB287 — which passed the Senate with 18 yes votes and seven no votes — doesn’t do enough to protect Utah’s youth. Sen. John Johsnon, R-Ogden, spoke in opposition, arguing that the bill “does not protect children directly,” as it “does not establish privacy standards” or “regulate harmful practices.”

“Taxing the infrastructure does not solve behavioral or data concerns, it simply adds cost and complexity,” Johnson said on the Senate floor. “If we want guardrails for minors, let’s be precise. If we want privacy protections, let’s legislate them directly.”

He also argued the bill could negatively impact Utah’s economy. 

“Digital advertising powers Utah’s startups, small businesses, nonprofits and free online services,” he said. “Adults should be free to decide what services they use, what platforms they engage with, and how they advertise their businesses.”

The bill now heads to the House for consideration. 

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