S.B. 287 Targeted Advertising Tax: transcript

Yeah. Thank you. And Jason Gardner seated to my left, and I'll let him introduce himself if there's technical questions. Those are questions that I'd prefer to defer to Jason. So lemme just start by saying what the problem is and the problem. Over the last decade, um, something about childhood has changed, disrupted sleep, declining attention, rising anxiety, and earlier exposure to harmful content. These trends do not occur randomly. They emerged alongside an online economy, built on targeted advertising and, and engagement, maximizing designs for too long. Targeted advertising companies have monetized children's vulnerability, mining their data, capturing their attention, and gathering revenue while avoiding accountability. Um, our children in Utah are not commodities. Uh, in today's marketplace, children's attention is treated as an asset to be extracted, optimized, and sold. Um, we've, we've spent a lot of time working on issues similar to this in the legislature. We spent a lot of time trying to find ways to protect our, to protect our kids in, in a meaningful way. Um, targeted advertising is not intentional. It's designed to addict minors exploiting vulnerability for profit at the expense of kids wellbeing, focused in self-worth. Since 20 2009, there's been a sharp increase in emergency room visits for self-harm among our, our youth girls. The CDC reports that 57% of teen girls feel persistent sadness, hopelessness in our schools. 97% of our kids use phones during class. Um, thankfully that's changing thanks to some of the good work in the legislature. So one of our principles is, is Republicans, um, and, and just, just as lawmakers in general, and, and this isn't, this is just a conservative principle, and I think both Republicans and Democrats share this. Accountability is a core, core principle. It's a core conservative principle and a principle here in Utah, we believe in innovation, free enterprise, limited government, but markets only work when incentives align, align with public good. So this is a tad, uh, a targeted advertising tax. Uh, um, I, I, I'm not gonna, I'm not gonna ignore, ignore the word. That's what it is. And it's a 4.7%, uh, uh, that would apply. It only applies to those that are in a hundred million dollars globally in TA targeted advertising revenue, or earn a million dollars from TA targeted advertising in Utah, uh, and derive at least half of their revenue from targeted ads. And, and, and, and that eliminates a lot, a lot of, a lot of folks in your small businesses. Where does the money go? Um, we, we had the Senator Musselman bill, the tax on pornography. I think you've seen that. You'll see that some of the language is similar to that. The, the revenue directly supports children's wellbeing and families through child literacy programs, youth sports and recreation, youth volunteerism, mental health programs and services, parks and other public spaces. Again, we, we, we believe in accountability in this state. When corporate profits at the expense of children happen, uh, the responsibility on us is to take action. And with that, Mr. Chair, I am happy to open up for questions.

Uh, a again, Jason Gardner's here, if there's something technical about the application, this bill, and he's, you know, he's my phone of friend today. Does your phone a friend want to add any comment in with or nothing? Okay. I've never realized I could just have Jason stand up and do my bill for me. That sounds delightful. I'm doing that in the future, Jason. So that's, just get ready. That's Great. He's much smarter than me. The truth is, chair McKay, you understand these tax issues much better than I do, but for me, having, having a little assistance on the technical stuff is probably useful for me. Well, uh, if it makes you feel better, I lean on Mr. Gardner for tax knowledge as well. So don't feel like, uh, it's a one way street there. Okay.

Yeah. Can you talk a little bit about the preemption issue with regards to the Internet Tax Freedom Act?

So, as far as the issues, the legal issues surrounding the actual administration of the bill, uh, the tax commission typically will administer a bill as written. Meaning, assuming it's legal, we will assume that any, any bill passed by the legislature is a legal bill and we will administer it as such. And so, I don't know that I would feel comfortable weighing in on the legality of, of the language itself. Okay. And, and to your question, Senator Brammer, I, I, I, I could have brought attorneys here. Um, we've had several bills where the state has been involved in litigation. So I think they were hesitant to come and provide legal advice to the legislature. That's something that I'm happy to talk to you offline about.

Okay, thanks.

Thank you. Um, Senator McKell, I presume the way you've crafted this, it would not put us out of compliance with the streamlined Sales Tax Act. Is that correct?

Um, I'm gonna defer to Jason on this one. I I can, I can weigh in on this.

So this, uh, does not tax transactions itself. The only link that it has to sales tax at all is the fact that the rate of taxation is tied to the 4.7% in code. That's the sales, the state sales tax rate. But that's the only crossover to sales tax. And that was just for the purpose of, uh, making so that the state chose to increase the state sales tax rate, that it would automatically increase this rate as well. But that could have just as easily just said 4.7% Yeah. Directly.

I'm aware of that, but I wanted that on the record. Yep, Good question. Okay. Thank you.

So there's nothing in the bill that would impose any requirement on a provider to not pass on the tax as a cost of doing business? Uh, I would presume that what would happen as is the case with any business, uh, the cost of doing business and the cost of the advertising may be reflective of the tax embedded in it. Yeah. Yeah. I, I don't have anything to add to that. I think that's accurate. I I think we need to be careful there. There's some really good pieces in Maryland and there's some pieces that have caused problems with their litigation, and we've, we've looked at that as we've crafted this bill.

Thank you Chair and thank you committee for the time today. Uh, Billy Hesterman with the Utah Taxpayers Association. And, uh, also thank you to Senator Mikel. We know he's always willing to be a, a, a good sponsor to work with and someone who is, uh, open to new ideas and suggestions. Uh, with that said, though, we are opposed to this legislation as it's currently written. We do have a lot of concerns about what might be passed down onto Utahans as they advertise on the different platforms that are being impacted by this, uh, legislation. As we, as already has been explained, it's safe to assume that a business might see this increase in cost for them. And so then they're simply gonna pass it back down the, the food chain back down to the, uh, the customers they have, which then will also increase their costs on their final product that they sell to those here in Utah. And so it's a tax increase on the businesses and potentially an increase in costs on those who, uh, patronize those businesses. And so, for that reason, uh, we see lots of problems with how it's currently written. We certainly, uh, understand there's a mental health issue for teens that we, we are supportive of seeing be addressed. We just don't feel this is the correct way to, to fund it at this time.

It is. Go ahead. Okay. Perfect. Um, Mr. Chairman, I do have a couple of handouts that were, um, given to the staff. Mm-hmm. Um, so have they been distributed? I, yes. And I did email them for the individual, the, the member that's on the online. Yeah. But good afternoon, everybody. My name is Deb Peters. I'm a recovering state senator from South Dakota. I'm a past president of stream of National Conference of State Legislatures. I'm a past president of the Streamlined Sales Tax governing board, and I'm a CPA, uh, with extensive experience and state tax law. Today, I'm here on behalf of the Americans for Digital Opportunity to express our strong opposition to Senate Bill 2 87. Very simply stated, this bill would impose a tax on targeted advertising while the intent made to target large tech companies for the v various reasons that the Prime sponsor stated. The, the reality is this, it's Utah's small businesses, retailers, restauranters, real estate agencies, legal practices, accounting practices, and just to name a few who would feel the biggest impact. Advertising is one of the most effective and affordable tools. Your businesses here in Utah have to reach their customers and stay competitive. Taxing advertising, especially online, raises costs for everyone. I've seen it over and over and state after state, and it is this case. In, in this case, it would not be any different. Increasing expenses on a handful of large companies by levying a brand new tax will only trickle down to your smaller local Utah families and businesses that are using these avenues for communication and to get their story told, to grow their consumer base, and quite literally put the name on a map, the small businesses will feel these repercussions. The entrepreneurial and small businesses are the pride of the business community and an environment here in Utah. The economic impact here in Utah would be very significant. Not only does this bill implement double taxation for these companies already paying corporate income tax here, but advertising supports over 315,000 jobs and almost 60 billion in economic activity across the state. This bill threatens all of that activity. We should be talking about affordability. We should be finding a pathway to make life easier and more affordable for your families and small businesses to, to do business. This bill is the last thing that should be done. Given the lingering impacts of increased prices and high interest rates, in addition to the economic harm of Senate Bill 2 87, it will cause le uh, serious legal concerns. It risks violating the Internet Tax Freedom Act. This bill may also be vulner vulnerable under the commerce clause, particularly by targeting internet based activity in a way that could burden interstate commerce. My final point is the funding of important youth related programs. These priorities are noble and reasonable. However, programs should not be funded using a funding source that will likely face legal challenges. These programs should be funded with a solid funding source, not ones on a shaky legal ground. Utah has always been a leader in innovation, and especially a leader in supporting their entrepreneurial spirit. Instead of taxing the very tools that help your small businesses thrive and prosper. I urge you to reject this, this proposal and focus on policies that grow your economic, your grow your economy. Don't shrink it. And thank you. And I'll stand by for questions.

So it, it doesn't actually impact the streamlined sales tax governing board compact because it just references the sales tax code. However, when you talk about being involved with streamlined sales tax, it talk, it comes with sales tax law and sourcing laws. And it comes to a basic understanding of doing business in your state and sourcing of transactions and, and how, how sourcing of just doing business in your state. The language in this bill is not consistent with how that would work. So you would be reinventing a new way to a portion income and tax policy based on a sales and then charging a sales tax rate to it. So it's gonna be complicated. Um, honestly, I'm not sure how it would actually work. I don't know if it's actually feasible the way it's written in this bill based on how you would source it, the services.

Hi there. Commissioner Valentine. If you'll fill in that MTC, that'd Be great. So, I'm Dina Alexander. I'm a mom. I'm from Lehi, Utah, and I work with the Child First Policy Center. I'm also a small business owner who has used online ads, Google ads, uh, Facebook ads, Instagram ads, and, uh, for the record, I'm willing to take that hit for our kids. However, tiny or big that is, I have watched, I've been a child advocate for more than a decade, and I'm also a mom who has watched how the digital world has changed our kids in the last decade, not for the better. For years, families have seen large technology platforms build massive profits through behavioral advertising that depends on detailed user profiling. That includes profiling our kids. This bill recognizes something that many parents already know. Instinctively, when a business model relies on attention and data, kids are often a part of that system, whether we intend them to be or not. As B 2 87 places responsibility where it belongs, it does not target speech or content, and it does not punish small businesses. Instead, it applies narrowly to large entities whose core revenue comes from data-driven targeted advertising. This bill simply asks, when that when companies profit from attention targeting at scale, a small portion of that vol value be reinvested back into our communities where those impressions are delivered. From a child safety perspective that matters. Behavioral advertising rewards longer engagement and more impressions. The more time young users spend interacting and on targeted content, the more profitable those systems become. That incentive structure does not usually align with healthy child development or balanced childhood experiences. What makes this legislation different is that it shifts a small portion of those profits into pro programs that directly benefit kids. That's what I am most excited about. This bill Revenue goes into literacy programs, youth recreation, volunteer programs, and more importantly, mental health services. I've been watching this, these type of bills around the state, and these are actually compared to, you know, recently Louisiana had an injunction on their social media bill, but Washington has a social media tax bill. Very similar. Guess what it's holding up great, because these tend, these type of social media related bills tend to hold up the best in court. This is a balanced bill. Like I said, it doesn't regulate ideas or expressions. It addresses an economic model built on large scale data targeting and ensures that when children are part of that huge ecosystem, that our communities receive meaningful support. So I urge you to please support it. Thank you, commissioner.

Thank you, Mr. Chairman. Commissioner John Valentine, chairman of the Utah State Tax Commission. The task Commission has not yet taken a position on this bill. It's, uh, been too fast. Uh, so we have not a public position, but as Mr. Gardner indicated, we've been working very carefully with the sponsor of the bill to try to get it to a place that is the most able to be administered. And with that, Mr. Chairman, I'm willing to answer any other questions. I don't see any questions.

I don't think so. Not directly, but I'll ask, I'll ask Mr. Gardner to, if There's nothing that we're ta taxing directly, however, the advertising revenue of a firm would be subject to income taxes as normal. So of course, through that avenue, then yes, we're taxing advertising indirectly. Yeah. And Remember, this is not a sales tax, as was, it was explained by both Mr. Gardner and as, uh, uh, debits had indicated as well. Right. More excise than anything else, but It is more of an excise type tax. Yes.

Okay. Uh, my name's Dylan Waites. Uh, I am with the Council on State Taxation in opposition of SB 2 87. Uh, cost is a non-profit trade association based in Washington, dc. It was formed in 1969 as an advisory committee, uh, to the Council of State Chambers of Commerce. And today has an independent membership of approximately 500 major corporations engaged in interstate international business costs. Uh, objective is to preserve and promote the equitable and non-discriminatory discriminatory state and local taxation of multi-jurisdictional businesses. We are not anti-tax. Um, as has been mentioned before, the proposed targeted advertising tax on gross revenue. It is a new and controversial and untested tax. We've seen Maryland's gross receipt tax on digital advertising has been embroiled in litigation. Washington's sales tax on advertising service is also in litigation right now. Uh, the pro proposed tax violates fundamental principles of sound tax policy. It creates a disadvantage for Utah businesses by taxing business inputs. So, while it is an income tax, um, it is going to be passed on and will be a burden on everyday businesses. The definition of, uh, targeted advertising while could cover many different types of advertising in subsection three or three little, i, I, um, it does limit it to advertising that has the ability to interface with the advertisement, which does mean this is a digital, uh, advertising tax, which would fall into the same risks and errors that Maryland and Washington have. Finally, uh, it will be challenged and will create, uh, an unstable source of revenue for some very valid causes. And we oppose, uh, this and ask that you not, uh, move this bill forward.

Thank you, Mr. Chair. My name is Caden Rosenbaum and I represent Libertas Institute based in Lehi, Utah. I am testifying virtually today. Thank you for that. Uh, virtually from New York City, and I'm testifying in opposition to this bill. We use social media to advertise our total twins books, which put the, the free market ideals of great minds in the hands of kids, give parents a tool to teach their kids good free market policies and educate the youth. We also use it to tell stories and change hearts and minds in the state of Utah. This would directly impact us. This would be passed right onto us doing good by parents and kids. The other piece of this, uh, the reason why we oppose it, that targeted taxes like this are unconstitutional, this would be a discriminatory tax. And the Supreme Court has already struck down at least two. There are probably more I did not finish, but at least the Minneapolis star and then this other that I can't pronounce. Over the years, over the last century, this has been unconstitutional. There's also a bill from Congress called the Internet Tax Freedom Act, which prohibits taxes that don't apply to the online world the same way they do the offline world. So we just heard that there are no similar taxes in Utah, which means that billboards, uh, infomercials on TV screens, those are not going to be taxed the same as social media tax, which makes this discriminatory and probably preempted by Congress already. Now finally, I, I will just speak to the, the bills in Maryland and Washington. Those have held up because they haven't been ruled on, but they are definitely in court and they definitely have a good chance of, of, uh, being overturned in the courts. This is just one reason, or this is just one of many bills that are being passed across or being introduced across the states that we would oppose, especially here in Utah, especially when it comes to things that impact our ability to get tunnel twins and the hands of kids parents, uh, across the state. Thank you for your time. I'll, I'll wait for any questions.

Mr. Chair. Uh, I wanna make a motion that we favorably recommend SB 2 87 to the Senate.

Um, yes, I think it's, you know, it gets to the point where we need to have a better understanding of just how much, you know, people take advantage. And companies have been getting a pretty nice deal here of, um, targeted specifically children and minors. And I'm interesting to see a process where we get to actually create some revenue that will help us tackle some of those, um, really complicated issues. And now we are having to address as a crisis. I think this is putting us in the right direction to help us in that process. And without, I'll be asking my colleagues to support the bill.

Yeah, thank you Chair. Only Because he has a lovely flag behind him, so we'll go with, we'll Go with that. I do have some concerns as was raised by the, by Billy and the taxpayers, um, association. Um, but I also do believe that that, uh, you know, some accountability measures might be appropriate. Um, so while I have some hesitations, I plan on voting. Aye.

Thank you, Mr. Chair. Uh, yeah, like, uh, like Senator Cola Moore, I had some concerns. I've talked with a sponsor. He, he's, uh, guarantee me he is gonna continue to work on the bill. Um, but, uh, I have faith in, in the good, the sponsor and hope that, uh, you know, he can find a, a place that, uh, bring people together. But, uh, I, I will be voting aye, to get it out committee and, and allow the senator to continue to work on it.

Yeah, I, I have a lot of concerns on this. I'm going to be a yes to help you get outta committee, uh, but I just want you to know on a few of the things. Number one, I think you're preempted. Uh, I haven't seen good arguments or heard good arguments as to how this does not, uh, violate the internet, uh, tax Freedom Act. Um, you know, typically you would look at whether it's a state tax, whether it's imposed on electronic commerce, and, uh, whether the similar rate is imposed on other similar services. And, uh, you've kind of violated it in a couple of ways. Not only is it similarly imposed on or not, is it, not only does it really only apply to electronic, but you've also built in these Systems that only the large can get taxed. And, uh, you know, from a tax policy standpoint, I think that's a really dangerous thing to say is once you're, so, once you're profitable above a certain amount, then you get taxed as opposed to, uh, you know, a broadly applied tax. I think the tax system that you're putting in place here is, is a scary one. And so I'm gonna be a hard no on the floor on second and third reading on this. I'm out of, you know, consideration. I'm gonna vote yes to let you through, but I really don't like the way that this, this tax is structured there. You know, and I don't like using taxes to, to address social ills. Uh, you know, it's a really inefficient way to do it. Um, and, and so if there's something that you want to change to address the problem that you're actually getting at, which is kids on the, on social media, you know, let's get it changed. But doing it through tax policy is, uh, I have, I have significant concerns on that. It, it's kind of like I don't believe in a progressive tax system. I'd rather collect the revenues and help poor people rather than pretend like I can do it through a tax rate. And so, um, you know, that's one of the concerns that I have on this. And so I'm gonna be a yes, an extremely hesitant yes. Okay. With an encouragement that you get

Well, my light's been on. I wasn't gonna highlight that. Thank you. I appreciate the sponsor's passion on this. However, I don't think it falls in conformance with uniform and equal treatment of taxpayers. It's creating some call outs and I'm not sure, I don't, I'm not sure that it is in conformance with efa. So, um, I, at this point, I can't support the bill.

Thank you. And just summation, I was, I was taking notes. Senator Brammer, Senator Harper, um, I want a chance to try to, try to try to address those. And if we can't address 'em, I, I understand exactly where you're at and I think that's, that's helpful. But I would like a chance to keep working on it. Obviously, we've got a serious, a serious problem that we've, we've been tackling through a number of bills. Uh, we're gonna tackle it through ai. We've attack, tackled it through app stores. We've tackled it through. So social media. Um, I, I like the approach in here, but I understand I under understand the hesitancy and, and you've got my commitment. We're gonna keep, keep working on it if this advances. So thank you.

Summation, Mr. Chair.

Thank you. And I saw that Representative Hansen. I know there's a chance to get you to an I vote on something. No, I'm just kidding. Hey, let me, let me just start by don't yourself. I, I love our legislature and I love what we stand for. And as I, I sat in the, as I sat here in the committee, before I talk about targeted advertising, I, I've just thought about the bills that, that both the House and the Senate have run over the last few years. And, and watching Representative Teuscher, I know he's the, he's my floor sponsor on this bill. But watching up here testifying, thinking about all of the good things that we've done, um, we've put our kids first and Utah has been a leader on that. And, and there's really three strategies when dealing with some of these problems we face, especially with social media. But I, I I, I wanna review this. I think this is incredible for the public to hear. Um, we, we had a very good app store bill that came through both the House and the Senate. I know in, in my body, I think of Senator Weiler. 'cause he was running, running that bill and really worked a lot of stakeholders. And the concern was, how do we, how do we deal with this issue? How do we protect our kids? And that Bill stood out to me this session. Uh, I think about Senator Musselman and he's got a, he's got a version of this bill dealing with attacks on pornography and advertising. And, and you'll see that the restricted account that we create looks a lot like the restricted account that Senator Musselman takes on. Um, Senator Weiler a few years ago, we, we dealt with, with ID verification and pornography, and he modeled it a little bit after Texas. And, and literally after that bill passed in the state of Utah, PornHub, the, the largest pornography provider in the world actually turned off their site in Utah. And, and that is remarkable. Like this last year, the Attorney General had a settlement with the pet parent company. Um, I, I think of Representative Tusser and I think of the algorithm language that, that we worked on. We, we literally ran language putting the compelling state interest in the code, identifying how these companies, these social media companies are, are targeting our kids. Um, I ran some social media legislation again with representative, uh, Scher, dealing with these addictive features. And, and, and we're gonna talk about addictive features, but we also have, we're also dealing with chat boxes and, and Representative Fiefia is working on that, trying to protect kids. And I think that is important. And, and let's not forget, in our schools, we're looking at how do we get these, these cell phones outta the classroom so our kids can learn. And I look at Representative Welton leading out on that with, with rep, with Senator Fillmore. And, and I guess my point is, is our state is a leader when it comes to protecting, protecting our kids and dealing with these aggressive companies that continue to market and advertise to our kids. Um, our strategy has been threefold. The first thing that we have done in the state of Utah is legislate. And, and I think when you look out across the country, you look at what other states are doing, we've, we've legislated and we've done a very good job. Second thing we do is we, we litigate and on all of these bills, it, it, it, one of the things that I really appreciate is the fact that we work with the, we work with the house, we work with the Senate, we work with our attorneys, we work with the executive branch. We, uh, including the Attorney general and, and all of those organizations have had a chance to provide some really good feedback on the bill before you. And, and the last thing that we look at as a strategy is tax. And, and we are doing that in this scenario, similar to the pro pornography bill, similar to the cigarette tax that's coming through the house today. But I'll tell you, when we look at the tax packages that have come before the legislature this year, we have cut income tax. We've upped the child tax credit. We've, we've done some tax credits for businesses. And if, if there's a tax on cigarettes to offset and tax on pornography and social media companies or big targeted advertisers, the tax burden for our taxpayers is still going to be, is still going to drop in in the end. Um, I do want to talk about the amendment, and there is an amendment to this bill. And one of the things you'll see in the amendment, I'm, I'm gonna ask this committee, hope this committee will adopt, is, is we are worried about taxing. And you'll see that we've added that an offsetting cost of a program or services described above. Section three A is something that we can do. Uh, this, this bill would specifically fund child literacy, youth sports or recreation programs, youth volunteerism, mental health programs, adoption and foster care services. But we do put an offset. So we, we, we can over time pull down, pull down any, any tax. So the mechanics of the bill are such, it's a 4.7%, it's a gross receipts tax. Um, these are companies that have a million dollars in targeted advertising in the state of Utah, a hundred million dollars. Um, outside the state of Utah, I've had a chance to have this bill thoroughly vetted with our attorneys, the attorney general's office, the state attorneys, and we've also had a chance to have the tax commission, um, Justin Gardner and John Valentine all review this bill. Um, with that, I think we've got a good bill before us, and I'm happy to answer any questions.

Thank you. Uh, so just a quick question. Yeah. Some of the feedback, some of the negative comments we're getting that are this, are that it's just a punitive attack on the social media companies, uh, just trying to continue this Yeah. Is how would you respond to that? And then as a small business owner, how would you respond to that? The fees are just gonna get straight, passed through and injure me as a small business owner that makes most of my revenue off online ads.

Yeah. Great. Great question. So, just to be absolutely crystal clear to this committee, targeted advertising is intentionally designed to addict our minors exploit their vulnerabilities for profit at the expense of our kids. The companies that we are targeting in this legislation are targeting our kids. They're monetizing off our kids and their data mining off of our kids. This, this bill does actually not go to the, the, the tax does not go to the small business directly. It could be passed on, there's no question. I'm not gonna say it couldn't be passed on, but this tax would only only, uh, target those companies where 50% of their, of their revenue is derived through targeted advertising. They'd have to have a hundred million dollars in targeting adv, uh, targeting advertising revenue globally and a hundred and a million dollars targeting advertising in the state of Utah. Um, could it be passed on? Yes. There, there's no question that was an issue. This, this legislation is similar but better than what you've seen in other states like Maryland. That was an issue before the courts where it was problematic. But we need to change behavior and we, we, we need to get these companies to, to rethink their business model. These companies would only be subject to this fee if, if they're doing targeting advertising, if they're addicting our kids. And, and the hope is, the hope is, is this could change behavior over time. And I hope it would.

Thank you. Thank you. Uh, I I have a question, uh, as well. What do you say to the critics who certainly we want to prevent, uh, uh, advertise target advertisements to our kids, but the bulk of advertisements target those with the money, target target adults, um, both on social media and on other internet platforms. What, what do you say to the, to critics saying you're raising costs to, to everybody?

Um, I, I, I think that's a fair criticism. I mean, ultimately when we look at these, this target advertising, um, what we're suggesting with this tax is we're suggesting they change their model. These are companies that are mining the data of, of you and I and our kids. And, and ultimately, um, this, this is a, this is a tax on a type of model that uses, I mean, similar, similarly, I brought up Representative Teuscher in the algorithm language. They're, they're using targeted advertising in the algorithm to do that. And, and we're all paying a price. And, and here's the bottom, here's the bottom line on, on this issue. When you look at the restricted account, we're creating this targeted advertising, these algorithms targeting us, harvesting our data, mining the data of our kids is creating a significant cost. It's creating a significant societal cost. And I think it's important for us to recognize that there's a societal cost and to put some of those dollars back, back to back to society to help resolve those conflicts. Um, we've looked at the data. If you, if you look at some of our site dealing just with social media, I know it's a little bit different. Social harms dot Utah dot gov, looking at the data, look at the number of kids who are suicidal, the number of kids that show up in hospitals, er rooms. I think the most powerful testimony that I heard as we've worked on this issue in the past was, was Senator Plumb talking about the kids showing up in ERs in mental health crisis because they're being, I mean, the truth is they're, they're being targeted and, and, and this is a good way to put an end to it or at least slow it down. And if we can't slow it down, we'll have some funds to help deal with the fallout, which is already happening.

Thank you. As a follow up to that, that the bill, uh, says subject to appropriation money in the account may be used for some, some very good cause. Child literacy programs, youth sports, recreation, youth volunteerism, mental health programs for children, adoption, foster care. It doesn't specify how that money is to be divided up. Is this essentially up to the legislative executive appropriations committee, or how do you envision the, the appropriations for this happening? Yeah,

Great, great question. I mean, I, I envision it going back to the full legislature where all of us would be able to provide some input. And, and you'll see in the amendment, we, we do wanna offset some of the costs of, as well as a way to look, we're at a, this is a 4.7% gross receipts tax, but if we offset the cost of some of those existing programs, we can actually take that 4.7% and, and turn this into something that's gonna look more net neutral in, in the end. I mean, I, I, I'm not worried about the tax amount. I'm not worried about the, the revenue we, we collect. What what I'm worried about is the problem these companies are creating through targeted advertising.

Thank you, Mr. Chair. So, uh, what appeared to me out of left field last night and yesterday, I started getting a flood of hate emails and texts and, uh, phone messages. Yeah. Accusing me of being a dirty tax raiser. Even though, as far as I know, I've always voted to lower taxes. And it wasn't until just a little, a few minutes ago that I learned that, uh, one of the large social media companies is, uh, sending out these graphics to all of the registered voters in our districts. Yeah. Saying, saying that we're doing nasty things to them. Um, I'm wondering, are are you getting those in the Senate too? I mean, is this a or is it just the house? I don't committee that's being targeted here?

That's actually a fun question. Or we're getting them in the Senate. It is just like you're getting in the house. One of the interesting things, and and I'll put this on the record, some of, some of those who are advocating against this bill have said, this Bill is clearly unconstitutional. This bill will never withstand scrutiny. Well, it, it, it feels like they're pretty worried about it. And that is that, that those, those targeted ads that are coming at you right now with, with the, with the very devious looking faces that are AI generated, I mean, it, it's interesting that they're sending them as broadly as they possibly can, but we're getting, we're getting them as well. But I will say to to your point, I, I guess not to your point, but to, to my point, we, we got a lot of opposition on all of the things the legislature's done. And I, and I think our kids are worth it. And, and this is a legislature that's led out in the country, and we have said enough is enough, but, but we're getting them. It looks like a C four. It does look like it's tied back to the social, social media companies, but pretty aggressive, pretty aggressive stance. And I'm glad you put that on the record.

Well, I wanted to put on the record that they did switch my vote. I was against this tax increase, but I'm for it. So, thank you, Senator.

Thank you, Mr. Chair. Um, senator, can you just walk us through the change from the amendment? Uh, why, what's, what's the reasoning behind changing, um, that it's only through a link or QR code? What was the purpose of that?

Just to make sure it was broad, a little more broad. We, we wanted to make sure that if we have a legal challenge, that we broadened it a little further so we, we can sim we, it's not just gonna be, you're just targeting social, social media companies. So it, it's just to make sure there's a more broad pool and, and the attorneys as they looked at it, they feel like that puts us on a little solid footing. Great.

Thank you. So, c can you clarify that a little? Sometimes, uh, some of our, uh, uh, large advertisers place advertisements, not necessarily just to be clicked on, but just to get more views. Yeah. Just to give impressions. So you're saying if it, if it's just an impression, then it's not subject to the tax, it has to have a link to click through to a,

To a sign. We're, yeah. So we're just broadening it with that QR code. 'cause there are some larger advertisers that do that. But I, but I will say, even though some of those advertisers do that, um, most of them are still, will, will not be caught up in this, because we're talking about targeted advertising. So let's say a billboard company puts a, puts a big QR code out on I 15, um, that, but they, they put billboards up and down the entire interstate that that's not, that's not targeted advertising necessarily. What targeted advertisement is, is when, is when, when Representative Owens is online and he's really into gardening, and all of his ads are magically after they've mined his data, they've followed him, they've looked at, looked at, looked at him, the algorithm feeds him, um, endless, endless advertisements about shovels and gardening. So it's a little, little bit different. So if that makes sense. I don't know if you're into gardening, maybe that's a bad ex. That's probably a terrible example. So Text about, There we go. Probably a terrible example.

I was just waiting for your, your green light, uh, Billy Hesterman with the Utah Taxpayers Association. Uh, first and foremost, I'll note that I, me or my organization did not send any texts or AI generated whatevers to anyone on the committee or in the, the House or Senate. Uh, I've only had, uh, one-on-one conversations with each of you about our concerns with this legislation. And that's what I, I hope to share today. As, as many of you have already brought up with Senator Mikel, who we do appreciate. Uh, our concern is that this just is a tax increase and that it is one that'll be borne by Utahans. This isn't one that, uh, we believe will be felt very much by the companies that they're trying to target with this. It's not out of the realm of possibility that if myself, Billy owns a tire shop in Bluffdale, and I want to target, uh, people who want to buy new tires and Draper Riverton Herriman, that I might go to a social media site, we'll call it Face Snap, just to keep it generic. And I'll say, I would like to buy, you know, ads targeting people in these areas, and that they're gonna look at it and go, oh, you're in Utah and we see that there's now this new bill, this new bill that's making us have to pay this tax. So we're gonna increase cost for you. And so by that, we're seeing that pass through the Utahans are gonna be the ones paying for this. Now, with that said, I would state that we have no problem with wanting to make, uh, teen, uh, mental health a priority in the state. We agree that that is something that we should focus on. And so if that is a, a, you know, a main area of focus for the legislature and for the governor, we welcome that. We just think that that could be funded through the general fund and through the money that we already have versus doing it through a tax that's gonna hit our Utah small businesses. So with that, we ask that you hold this bill at this time. Thank you so much.

Well, I think I'd say, you know, from, I don't think it'd be a surprise to any of you, that our stance on a tax on a business is that it's a myth. That it's a way to hide a government cost. Uh, that when businesses are taxed, they only do a matter of three things. They either, uh, eat it and lost revenue. They either pay their employees less or they charge more for the product or good or service that they're providing. They don't ever actually absorb. The tax taxes are paid by people. And so, uh, from that perspective, I would say, you know, this is something that will be passed on in one way or another to those who have a financial interest or benefit from any of the companies.

Hey, Mr. Chair, members of this committee. My name is Caden Rosenbaum, and I'm here on behalf of Libertas Institute, which is based in Lee I Utah. And today, unlike last time I was before this committee, I am in San Francisco, California, just visiting. Um, today we're speaking in opposition to this bill. Uh, we didn't send any hate messages about any bills. Uh, fortunately we're speaking in opposition to this bill, and I just wanna lay out our concerns, uh, with this, legally speaking and practically speaking, first, we think it's likely a First Amendment violation. Uh, this kind of thing has been overruled by the Supreme Court. Just wanna bring that up if I'm wrong. However, it's definitely preempted by Congress through the Internet Tax Freedom Act, which says you can't tax online different than you can offline. Since this wouldn't apply to billboards, it shouldn't apply to online or else it's preempted for this bill to not be preempted, it would have to apply to probably all advertised. That's my my guess. And then finally, because I think this bill is unconstitutional, and because I think it's preempted, it's important to note that this would cost over half a million dollars to implement just for it to be overruled. Uh, we think that's a significant cost. And finally, as I mentioned in the last committee, uh, this would carry a significant cost to Utah businesses, none the least of which would be our t twins, uh, our children's entrepreneur market, where we teach kids great pre-market principles where we let them go, start businesses and, and advertise and, and prop up their tents and sell their products to people. This would significantly affect our ability to do so by taxing us every time we try to reach parents. We're just trying to get their kids good free market principles. Um, those things in mind, we, we oppose this bill, but, um, you know, if we can help here for that as well. Thank you.

Good evening, uh, Mr. Chair and members of the committee, uh, I thank you for the opportunity to, to speak to you today. Um, unfortunately I wasn't able to make it with flights. I got stuck in Rhode Island, so I apologize. But my name is Deb Peters. Um, I was able to testify in person in, uh, in Utah. I'm from the state of South Dakota, and I'm the lead tax policy expert for the Americans for Digital Opportunity. I oppose Senate Bill 2 87, the targeted advertising tax, because while it may be framed as a new revenue source or a way to fund specific programs, which I don't wanna discount the importance of those programs in it, in reality, it undermines the, your economic engine that fuels small business growth and entrepreneurialship in Utah, as we've already heard from previous Testifiers, spoke heavily about addiction and content and scrolling. But this bill is even as it's been, uh, talked about, being amended is directed towards targeted advertising activity, not the actual content that we're dis that have been discussed by the proponents. And they're two di very different things. Small businesses and startups rely very heavily on targeted advertising to find customers compete with large firms. As, as you already heard from one of the opposition, testifiers, a tire company isn't gonna, um, try to advertise to anybody that doesn't already own tires or need hire. So, targeted advertising is a very broad, even though it's targeted advertising, um, it's, it is, um, fundamentally going after somebody who's interested in your product. So you aren't targeting, um, to find customers compete with large firms. Um, this basic economics will stifle your innovation. It'll raise your barriers to entry and ultimately slow your job creation fiscally. This bill establishes new taxing regimes, which departs from your normal TR Utah traditional, broad, simple tax base, and beyond your economic impacts on this bill. We've already kind of talked about some of the legal policy concerns with the Federal Internet Tax Freedom Act. But, um, in summary, I just wanna make sure we, we, uh, summarize with this, this, this tax raises costs for your small businesses. It erodes your Utah's pro-growth climate, and it does nothing to regulate your content that you're concerned about. It can, it creates regulatory and compliance complexities that burdens entrepreneurs, most of all, that don't have the staff or the know-how to do the com, the compliance pieces. And it risks your legal challenges under federal internet tax principles that could leave taxpayers on the hook for these costs. And for these reasons, I would urge you to vote no on Senate Bill 2 87. Instead of pursuing policies. I would encourage you to, to pursue policies that strengthen rather than weaken Utah's small business community.

Thank you very much for those comments. I, I, I have, I guess one question for you. Uh, I don't believe that, uh, uh, Americans for Digital Opportunity would be subject to this tax, but, uh, because you don't qualify for the a hundred million, uh, dollars or the, uh, uh, a million dollars in Utah, but, uh, I, I would be curious if, if you want to opine on how much, uh, my understanding is that, uh, your organization is the one that sent a number of these, uh, messages to our constituents, uh, how much that tax would've affected you if, if you had been subject to it.

So our members, um, are with the Internet Coalition and, uh, a lot of businesses across the country will actually be impacted as far as who specifically, I cannot name them. Um, but there are a lot of, uh, startup businesses that are located across the country that actually do utilize targeted advertising in Utah. Um, targeted advertising is based on eyeballs and, and interest. And so when you're talking about trying to track where people are, where the advertising is going, and what they are interested in doing, small businesses, uh, even the tech companies that everybody deems, these large, big tech companies are not large and big tech companies. Yes, there are a couple of them. Um, but there are some small and medium sized businesses that still do these targeted advertisements, um, across the country. And it will impact everybody, uh, because of trickle down economics. If you raise costs at the top, it will, it'll absolutely raise the cost for the folks that are consuming the products.

Thank you. Uh, Mr. Chair, Ms. Peters, who are the member organizations or funders of your organization that you represent?

It's powered by the Internet Coalition.

And who are the members of that?

I don't know. Okay. It's a nonprofit.

Yes. Thank you, Mr. Chair. I just noticed that, uh, on the bottom of the scary pictures of all of us, it says, paid for by Americans for Digital Opportunity, which I believe is, uh, our presenter here. Um, you said you didn't know who's funding your organization is, are any of them meta?

So, I am a contract lobbyist or subject matter expert. I do state and local tax policy. Americans for Digital Opportunity is a grassroots organization that works to represent viewpoints, um, of businesses of all sizes, especially when it comes to advertising and digital advertising. And it is funded by the Internet Coalition. I work with the Emery, uh, Americans for Digital Opportunity, and the funding comes from the Internet Coalition. I do not know anything about the internet coalition. I apologize. So, but I worked with the Americans for Digital Opportunity.

So Mr. Chair, I do know, uh, that a little while ago I read a book called Careless People. If, if any of you are interested in some of the foundations of what's now meta, uh, one of the, one of the high executives in that corporation managed to get out and, uh, wrote this book called Careless People. And they, they talked about how they designed and utilized these, uh, targeted advertising, especially when they find young girls who are concerned about their appearance as they go through puberty. And then they bombard them with ads to, to buy products to feed into that mental illness that they're dealing with at that moment. And that's some of the feedback that we're seeing in our emergency rooms.

Great. Thanks. Thanks, Mr. Vice Chair. Appreciate the opportunity. So I appreciate and respect what the administration and what the sponsor are trying to do with this bill. Um, I'm frustrated with social media, uh, just like everyone else. I've got kids that are, you know, always on their phone and, and it's, it's frustrating. Um, and I agree that in Utah, we invariably try to put our kids first, but I don't think this bill actually does that. It taxes our businesses, and if we tax our businesses, it restricts their growth and it could actually drive them out of business. And then what do we then, how do we take care of our kids, right? This tax is also not the same as a tobacco tax or an alcohol tax, where although we're trying to discourage use of the social media platform, this is not a tax that, that taxes use of the platform. It taxes businesses, it's a hundred percent a pass through tax. Um, we say that we're targeting the platforms, but they won't take on this burden themselves. This tax won't change their behavior. They'll have, you know, they'll have their clients and then their clients' clients pay this tax, which unfortunately hurts Utahans. Um, so I realized that people are frustrated with social media. We all are, right? And the effects that targeting targeted advertising has on our, on our families or youth. But there's a place where targeted advertising is completely appropriate and helpful to the economy and consumers. So I think this bill misses the mark, and I would urge my colleagues to vote. No.

Thank you, Mr. Vice Chair. Uh, question, it sounds to me like this tax is going to, uh, really affect business. Could you tell me what, how much the tax is? Yeah,

Yeah. It is the same as we saw in Senator Musselman's. It's 4.7%. We just tie it to one of our state rates. And, and, and your chair. I, I respectfully, it's not a hundred percent pass through. That's not what the tax does. This is taxed directly to, to the entity that meets the definition. So a hundred million dollars in targeted advertising revenue, um, or a hundred million dollars global tech revenue that could be passed on. Certainly it could be, but companies also could change their behavior and not pay it. They could also choose not to target our youth and not pay the tax. So, so the statement that it's a hundred percent pass through that, that's not in the bill. That's not accurate. That's a misstatement on the record.

Yeah, I, I look at it, you know, on a, uh, what on a thousand dollars bill, if a business were paying a thousand dollars, is that like $40 in tax? I don't see that. That's something that's gonna break a business. And I do think that market principles will dictate whether or not that's just passed through to the businesses. I appreciate your bill.

Yes. I think it's, it's, it's friendly and it is gonna help us try to get more to neutral in the overall tax burden.

Thank you, Mr. Chair. I move, uh, amendment two.

I'll, uh, icontinue make a motion. Yes. Um, I move that we pass out SB 2 87, uh, as amended to favorably to the full house.

Yes. Thank you. I, I just appreciate the senator's. Good work on this. Um, I honestly had a hard time with this bill going back and forth, because I worry about anytime we're looking at raising attacks, especially as it relates to small business in Utah, when we are the state that is friendly to growth and small businesses. But I think with that said, the harms that social media has done, um, not only to all of us, because I think we, we'd like to say just our kids, but even as adults, um, is something that we need to pay close attention to. What we did when social media came out was wrong. We were reactive, and now we're paying the consequences. And now we're trying to go back and fix the issues that have been caused by social media. Now, I know there's been a lot of discussion on this is gonna be a pass through to our small businesses. I've worked at a, a company, a large company that does digital advertising. Uh, it rhymes with Google. Um, and the way that digital advertising works is they work off of an auction system. It's not Utah's gonna tax, and this is now what we're gonna pass through our small to our small businesses. They're worried about who's clicking at, at that certain time, what businesses are willing to pay that, and how ma what, what is the demand here? And so Utah will not set the rate of what the advertising will be. It is a global auction system. And so to say that it's a, it's a pass through to our small businesses, is not only inaccurate, but it's, it's also, I think, a talking point that's coming from our net c fours and nonprofits that are here to speak on behalf of big tech. Th this is a good bill. I, I, I don't think it's a perfect bill. I think we gotta figure out how to, how to reign back in what social media has done. And I think this is one of the levers that we have to pull as government to fix the mistakes that we made in the past. And so, um, I will be voting in favor of this, and, and I think this is a good bill. And so thank you Senator for your good work on this.

I'm on. Yeah, I'm on. Um, so, um, the comment that it was made about this not being a pass through tax businesses will analyze their profit and loss, analyze the, the expenses that they have, um, and find ways to minimize those expenses. Um, doesn't matter what business you're in, you're gonna try to find ways to minimize expenses and raise profits. So for, for example, let's just take taxes as, as an expense that businesses have to pay. They're gonna find ways to offset those expenses, that tax expense by raising their costs. It's just, it, it is economics. It's the way businesses work. And so to say that this is not a pass through tax, um, or that, or that, you know, these online platforms are, um, you know, somehow gonna pick and choose, which, you know, which companies pay this tax is, is not accurate at all. It's going to come back to the consumer. It always does, and it always will. That is how, that's how businesses work. And so, um, I think it's disingenuous for, um, comments to be made. This is not a pass through tax. Everything is a pass through tax. The consumer pays for the tax. Um, so I will be voting no on this bill.

Thank you, Mr. Chair. Appreciate those comments. I'll, I'll just also take the chair's product to, to add to discussion on the motion that I'll be supporting this motion. I don't think this bill is perfect, but states are laboratories of democracy. We have been in a, uh, cha a fight challenge to figure out how do we change the model of targeted advertising that, that we're seeing. How do we change the model of, uh, how we're we're dealing with, with online, uh, addictions? And I think this is an experiment worth, uh, pursuing. Uh, so while not perfect, I'll, I'll support it.

Okay, I am gonna plug in my phone, in my summation. I think there's a lot of folks that are curious if this pulls up. And this is, this is the, this is the ad. And, uh, I think we had a good discussion. But it is interesting that this is paid for by Americans for Digital Opportunity. And you're all seeing that, and the public is to see it now. I think it's a great ad. It's a great ad from a grassroots organization that nobody knows who they are and nobody knows who funds them. It's a great ad targeting all of us on a bill that's unconstitutional, that they're clearly, they're clearly worried about. Um, colleagues, I, I appreciate this legislature more than you'll ever, you'll ever know. Um, I, I feel like I'm surrounded by, by champions who fought for kids. And we've, and we've all fought together in different ways. Um, when we passed social media bills, we got, we got beat up on that. Uh, there were emails that were sent out. When we work on AI bills, we get beat up and people send eight messages out. When we worked on Bell to Bell trying to get those, those, those phones out out of our kids, it was successful and we all got beat up and we had people that didn't like it. I think this is a really good policy. Ultimately, it we're dealing with taxes and harm. Who's gonna pay for the harm? And I, and I think we've got a good restricted account. We got a place to put put to put those dollars to take care of the harm. But we need to hold these companies accountable. And without, I'd urge your support. Thank you.

Thank you, Mr. President. Um, this legislature has, has been remarkable in leading the nation in protection of our youth. We've, we've led with a lot of members of this body. I think I think of the bills that we've led on in the state of Utah. We've led on ai, we've led on app safety, we've led on pornography, and we've led on social media. Um, there, there's always a strategy in states and there's, there's basically a three-pronged strategy we, we regulate, which we have done. We, we litigate when we need to, and we are litigating. And there does come a times when there does come a time when we need to tax. And right now, over the past decade, something about our children has changed. Disruptive sleeping, declining attention raising, rising anxiety, and earlier exposure to harmful content. These trends did not occur randomly. In fact, they didn't occur randomly in the state of California. They're in litigation with meta right now, and the facts are pretty damning. And it's clear that meta was very, very much aware of the addictive nature of their product. They had a chance to do something about it, and they chose not to. Our children are not commodities. Utah will not stand by where our young people are treated as data points and revenue streams. In today's marketplace, children's attention is being treated like an asset to be extracted, optimized, and sold. And when profits increases, the longer a child stays engaged, the market begins, rewarding behavior that family, schools and society are forced to combat with every day. Um, we have a problem. It's a problem that the state of Utah has been leading on. And, and, and in some instances we've been very successful and others we have not. Um, this is, this is a, a, a 4.7% tax on companies that do targeted advertising. More than 50% of their revenue has to be derived from targeted advertising. Their target targeted advertising revenue in the state of Utah must exceed a million dollars in a hundred million dollars outside the state of Utah. Um, where does the money, where does the money go if we're successful? It goes to child literacy programs. It goes to youth sports and recreation, youth volunteerism, pro programs, mental health programs and services. And we've contemplated Park, park and other public spaces with that, Mr. President, I think we've got a, we've got an important step before us. I think it's time for the state of Utah to continue to lead and, and, and, and continue to lead on this issue. With that, I'd open for questions. Thank

Thank you. I I rise in support of the bill. You know, in, in 1981, if someone had knocked on my parents' doors and asked if they could collect personal information about me so that they could sell it to companies to try to, uh, target me with their advertising, I'm pretty sure my parents would've said no. And in 2007, if Mark Zuckerberg had come to the Utah legislature and said, will you please give me permission to collect personal data on 11 year olds, on nine year olds and 13 year olds, so I can sell that and use that to make money? I'm pretty sure we would've said, no. This is a bill that's designed to try to counteract some of that. So this is a syntax on companies that are selling our data and I'm going to vote. Aye. Thank you.

I, I just wanna say I thank the sponsor for the thoughtfulness about setting up a restricted account for this that we use to support youth. Uh, so supporting literacy, supporting mental health, supporting, um, our, our kids is really important during this time. And we know that cell phones and iPads and all of those things, um, are generating addictive behavior. We're also, people are selling that. Um, if they're gonna do that, then let's make sure we're able to help compensate and help support our children during that really important time of life.

Thank you. Uh, Mr. President, I'd like to talk for a minute about why I'll be an eye on two for this, for this bill. Um, I, and I want to address that from a time way of tax policy. And then this, this specific issue that we're trying to address. I was talking to a, you know, a taxpayer advocate outside our hallway today or yesterday, um, mentioning this bill. Um, you know, I'm not a fan of tax increases. I don't like to vote for them. Um, but, uh, this taxpayer advocate who opposes the bill, uh, said a comment that stuck with me that he said one day, we'll, we'll talk about social media companies the same way that we talk about tobacco companies today. Um, I think that's already starting, Mr. President, you know, these companies sell an a an addictive and harmful service. And when I say sell, of course I don't really mean sell. I provide a addictive and harmful service so that they can sell us, uh, to other companies. We are the product. Um, so, uh, on the one hand I, I think is totally appropriate in the same way, you know, we have pretty high liquor taxes in this state because liquor is addictive and harmful, and we have pretty high taxes on cigarettes, which are addictive and harmful. Uh, so I, I think that this proposal is of a piece with that, and I recognize that and can support it. Um, and I think the fiscal note on here, if I remember correctly, is around 16 million bucks. From a tax policy standpoint, I have always been of the opinion, and I've said it many times, uh, in this capital and on this floor, that we ought to reduce taxes on productivity and increase taxes on consumption. Um, you know, what you tax, you get less of what you subsidize, you get more of. This is proposing to tax an addictive, harmful service and instead subsidize at some degree mental health services, parks, uh, afterschool activities, things that are in fact very good, uh, for children, you know, to be outdoors, to be socializing together. So, uh, from a tax policy, the reason I'm an eye on two is because I would want to see the rest of our tax package. I am hopeful that if we, uh, increase this tax on a service, that we can also reduce our taxes on productivity. And I hope that we can, we can maybe see, you know, maybe a, a bigger income tax than we had planned, um, by, uh, generating some revenue, uh, with, uh, one of those less evil taxes, um, on an addictive and harmful, I, I'll just say product here, but on something that's addictive and harmful so that we can then reduce taxes further on, uh, on productivity and income. So I stand in support of that concept. Of course, I'll, I'll withhold my eye on three commitment until I see the rest of that tax package. But I'm happy to move this over because I think this is a, an important part of our tax discussion. And I hope that we approach it, uh, in that way looking at our tax package in totality. Uh, thank you.

Thank you, Mr. President. I also rise in support of this bill. It's, you know, bills that are focusing on protecting as much as we can, are more vulnerable populations, and having a really, um, explicit description of where that tax, uh, those tax funds are gonna go. It is, I think, the, the right approach and it's responsible, it's transparent, and I applaud the sponsor for this. Great Bill. Thank you, Mr. President.

Colleagues. Mr. President, uh, Utah's led the nation in responsible tech policy because we focused on targeted solutions, not broad economic penalties. That's why I supported the app store legislation. It focused on protecting minors and empowering parents. While preserving adult choices, adults should be free to decide what services they use, what platforms they engage with, and how they advertise their businesses. That is a liberty principle. SB 2 67 does not protect children directly. It does not establish privacy standards. It does not regulate harmful practices. It imposes a revenue tax on digital advertising. Digital advertising powers, utah's, startups, small businesses, nonprofits, and free online services. Taxing the infrastructure does not solve behavioral or data concerns. It simply adds cost and complexity. If we want guardrails for minors, let's be precise. If we want privacy protections, let's legislate them directly. But adults in a free society should retain the ability to choose. Utah should remain pro innovation, pro-growth, and pro liberty. I cannot support this bill.

Thank you, president. I hesitated to stand up, but, um, read about this bill. And I spent, uh, my career just like many of our educators in the state who are striving every day. And we pay a lot of money for this, um, to educate our students and to help direct them to chase their dreams. And targeted advertising though is meant to chase the, those who are targeting them to chase their dreams, not our young people. And I can't touch one time on a screen that I like this or that, and within seconds here, here it is. Um, the next advertisement matches that, that's targeted, uh, and it's targeting our children. So I stand in support.

Thank you, Mr. President. Thank you for the discussion. Colleagues. I know this is a, this is a hard issue, uh, to look at. Um, earlier today, I, I couldn't help but look over and see Senator Hinkins, grandson Cash. Um, everybody in here has either grandkids or kids, um, community communities full of kids that they work with. And, and that's the same for everybody in this room. And our kids are pawns in a game that we're, we're not winning right now. And the strategy that we've had in the state of Utah And we've, we've led out and, and we've had a, we've had ups and downs and a lot of, a lot of downs. Um, our strategy has been to, to regulate and it's been difficult. Our strategy has been to litigate and we're, we're continuing to do that, but our strategy needs to include attacks. It needs to include these companies bringing it to their attention, our, our, our next generation is worth fighting for and making sure we, we put focus on them. With that, Mr. President, I, I would move that this bill will be read for the third time.

Senator Vickers Baldy. Lewin Aye. Bramer bus Aye. Colmore Aye. Escamilla Aye. Gilmore. Aye. Grover Harper Kins. Ipson Aye. Johnson Juab McKay. Mikel Aye. Milner Mussman Owens Pitcher Plum Rebe Sandal Aye. Stevenson Aye. Stratton Aye. Bickers Aye. Weiler Aye. Wilson. Aye. Winterton President Adams Aye.

Okay. This is just a, uh, code clarification

Thank you. I I'd move amendment number one in my name.

Yeah, you, you bet. We wanna make sure that this restricted account is focused on kids. You'll see that we, we've added foster care services and removed management improvement of parks and other public spaces. You'll see kind of the order of what we're focused, focused on and we wanna make sure we stay focused on kids.

And this is on the amendment?

Okay. I I'll waive summation on the amendment and move the amendment.

And, and we had a good discussion about this last night. Um, I, I just wanna reiterate that we've been in this space. Utah has been a leader and I appreciate all the work that my colleagues have done on this issue across the board. It's been a, it's been a team effort both with the House and the Senate and there's been a lot of collaboration in the governor's office. We've got some problems with our youth that we're trying to tackle. And targeted advertising is a real problem. Uh, there's basically three things that we do. We, we regulate, we litigate, and we tax. And this is one of those times where we think there needs to be a tax. Um, I am gonna continue to work with, with the house on, on this bill. Um, I, I think they've got some concepts where we can turn this into kind of a net neutral on the taxing piece. Uh, but, but today, um, I I'd like to open up for questions. I think we've got the policy exact exactly right and I think we've got as close as we need to. And I, I think we, we've all, we talked about the problem yesterday, but bills before us and I'm happy to answer questions.

Now I'm gonna waive summation and move that this bill pass.

Thank you. Um, over the past decade, something about childhood has changed. We see disturbed sleep, declining attention, rising anxiety, and earlier exposure to harmful content. Now, these trends did not occur randomly. They emerged alongside an online economy that was built on targeted advertising and engagement, maximizing design. Now far too long, companies have been using these types of, uh, algorithms and, and systems and, and targeted advertising to monetize children's vulnerability. Mine their data, capture their attention and generate revenue without avoiding any accountability. Now, colleagues, we know this problem. We have been trying to solve this problem over the last few years. We've seen the harm from kids that we know, uh, our own kids, maybe our grandkids. This is a problem and we've tried to solve it. We've tried it by trying to regulate this space by trying to hold these companies accountable by proactively, uh, uh, levying lawsuits against these companies. All of that is currently underpinning litigation. But more needs to be done. I cannot say more emphatically enough that our children in Utah are not commodities and we will not stand by. While young people are treated as data points and revenue streams. Now for adults, this is different. Um, they can make choices online. How they wanna spend their time online is really their, their decision. But for minors, this is different. Children cannot meaningly consent to behavioral data collection, and they do not fully understand the systems that are engineered to hold their attention. Now, I could go on and on about different data points that show that this is a problem. I don't think we have time for that today. And I'll say that targeted advertising in and of itself isn't inherently wrong. However, the problem stems when the same behavioral manipulation business model is applied to children's whose brains are still developing. They are engineering this to addict children whose impulse control and attention regulation is still forming. And so to try to target that and help balance out the, the incentives that these companies have, we've come forward with Senate Bill 2 67. Senate Bill 2 67, uh, restores a balance by ensuring that when companies profit from targeted advertising to Utah's miners, a portion of that value goes to support Utah's children. It levies a 4.7% tax on this type of targeting advertising. However, it only applies to companies that, that earn over $1 million, excuse me, a hundred million dollars globally in targeted advertising revenue. And at least 1 million of that a hundred million dollars is for targeting advertising in Utah. It also limits it to companies that derive, uh, at least half of their revenue from targeted ads. This doesn't affect local businesses, startups, retailers, locally, family owned companies at all. These are the big fish that understand the harms that they're committing and have not chosen to fix the problem. Um, where does this money go? Well, Mr. Speaker, um, as I finish my speech, I'll, uh, I'll appreciate a, a good motion from, uh, a friend of mine here to move a substitute to this bill. But you'll look at the list of different options that we have, um, whether it's children literacy program, youth sports and recreation, youth volunteerism programs, mental health programs and services, parks and other spaces. And at the, uh, uh, great idea of of our good speaker, we've included, uh, different types of advertising programs that help kids understand the harms that this target of advertising can have on them. Now, Utah is always welcome to innovation and a thriving tech economy. This legislation still keeps that in line, but ensures that we are protecting our rising generation and ensuring that when profit depends on exploding, exploiting childhood development, that we come in and put guardrails in place. That's exactly what this is. It cleanse, it sends a clear market signal that, uh, we are targeting exactly the addictive nature of what's going on. The targeted advertising, discouraging the harmful behavior, and reinforcing that exploiting children is not a cost-free business strategy. With that, Mr. Speaker, happy to answer any questions.

Thank you Madam Speaker Roam motion to substitute That motions in order. I would like to adopt, uh, first sub SB 2 87. Would you like to speak to it? There's a few lines in there that I think need to be added for the presenter.

Thank, thank you. Um, I, uh, I appreciate the motion. Um, as you'll see, the, the real difference in the substitutes are, is included down, um, in lines starting 1 56 and on with, with the big, uh, change in line 1 68, that public education or awareness campaigns regarding the effects of targeted advertising on children, families, and adults.

You. Thank you. Um, Madam Speaker Pro, Tim, you, I, I rise in support of this bill. Um, I initially had, um, some concerns, um, about what might be passed on to businesses. And as I've thought about our role and responsibility in this body to watch out for and to protect our children, I've realized and, and have very strong feelings that we cannot have our backs against the wall by trillion dollar companies, um, who know how to manipulate the system and do so. And we know that because every time, uh, there's social media, uh, legislation that comes before this body, we have all the high powered lobbyists that come to lobby against it. I would urge my colleagues to have the courage today to not look at what people say could happen down the road with pass on of expenses to businesses, but look at what we have the power in this body to do today to protect our children. And I would encourage, uh, the support of this body. Thank you.

Thank you, Madam Speaker Pro Tem. I appreciate the opportunity to speak against this bill. Um, I don't think it does what it's, it's intended to do. Uh, I, I appreciate the sponsor, uh, bringing this before the body. Uh, I, I do agree that, that we do need to protect our children, but this bill doesn't do that. This bill taxes, uh, Utah residents, um, it taxes Utah businesses. Um, and it makes it less affordable, uh, to, to live in Utah. Um, anybody that says that this is not a pass along tax is mistaken. Every tax that that goes to a business gets passed along to the consumer. Every single one except for corporate income tax. That is a fact. Businesses are gonna try to maximize profits and minimize losses, and how do they minimize losses by passing along fees and taxes to the consumer. And so I applaud the effort and what we're trying to do here. We do need to protect our children, but this is a tax on Utahans and I, and I can't support that. So thank you Madam Speaker,

Thank you, Madam Speaker Pro tem. I rise in support of this legislation. As many of you know, colleagues, we are leading the way and we are setting an example to the rest of the nation in this space in protecting our children from social media. In fact, we are named as one of the top national leaders from the, um, childhood index. And so I would plead with you to think about what we can do. Other states are looking to us. They're watching what we're doing, and they're adopting the same policies that we are putting forward. And when we work together to put pressure and push back on these big tech companies, that's when change happens. And I will also add that this is very limited in scope. Not to local businesses, not to Utah businesses, but to large tech, multi-billion dollar companies that are targeting our children for their information for a profit. And I urge you to support this bill. Thank you

Thank you, Madam Chair Pro temp. Um, I rise in strong support of this bill. Um, I went back and forth on this bill because of the idea of attacks. Um, but having worked for the largest digital advertiser, um, I know the harms are real. And currently I'm on a repentance tour. Um, now targeted advertising is very different than when we grew up. When we grew up, there was a newspaper ad, a billboard, a commercial. It was the same for everyone today. These large advertisers, they are collecting massive amounts of data on all of us. What we click on, what we watch, how long we watch, even when we are vulnerable, what we buy, all that data is kept in a profile on each and every one of us. And that is what informs an algorithm. And then that is what shows up on your screens. Now, we talk a lot about the freedom of speech in that battle, but we don't talk enough about the freedom of will. That is what is at the balance is our agency. The ability to choose that is what they are trading trillions of dollars. And their bottom line for is our freedom of will. And so, colleagues, I urge you to support this. Now, this doesn't solve the world's problems of Target advertisings, but I think it's a step in the right direction. And so I, I urge you to support this bill. Thank you.

Thank you Madam Speaker ProAm. I would also like to stand in support of this piece of legislation. This is an important piece of, of legisl of legislation, uh, that we're looking at. IIII, I struggle with the argument that we're taxing small businesses. We're talking, uh, companies who are making hundreds of millions of dollars. Many of them are making $60 million a quarter. These are not small companies that, that, uh, are, are being impacted here. Additionally, we've spent a tremendous amount of time this session dealing with addictive devices, which is where most of your targeting advertising is coming from. We recognize that devices are addictive. We are pulling electronics out of school. We are restricting targeting advertising on our school databases. We have, uh, just passed legislation on sleep studies, which is also impacted by this. We're talking about AI chatbots. All of these things are coming through because they're targeted towards our kids. And we are taking a whole bunch of steps. And what this does is it takes a little piece back and it helps us fight back. It gives us tools and money to fight back and to give the education that is needed for, for the wellness and the of our, of our children and our youth. And so it urge the passage of this bill.

Thank you, Madam Speaker ProAm. Madam Speaker ProAm on the desks of this floor is a handout that, that I have distributed, which outlines a series of advertisements that have been proffered among the public many of these decades and decades ago. And if you look at this piece of paper, you see that it was once commonplace to say that Smoking for Pregnant Women was the way to go. That we could put mercury in our makeup with zero consequence, that we could put our children and wrap them in asbestos and everything would be fine. And as we have moved the regulatory framework away from those problems, we have heard the same tired arguments from those companies that it taxes on a syntax is a tax on consumers. That is what we have heard from those who d who create those poisons for our kids. That this will increase the costs. How many times has those who manufactured poisons are in our homes said those exact same words? Those arguments are tired and they are old. Facebook is the Philip Morris of our day. They are killing our children. This is not figurative. This is literal. And the statistics bear it out. Now, there comes a point in every, when, when we face every sin or vice, and we know that it is wrong, that it becomes the it that nec it becomes necessary for government to step in. When we know a product exists that destroys the lives of our children, it is our obligation to do the right thing to diminish the, the reach of that horrible and horrendous behavior. Social media is not our friend. Social media is a terrible nanny. Social media is not helping this country. It is tearing it down. The least we could do is ask them to pay to put the pieces they break back together in some form or fashion, which is what this bill begins to do. Thank you, Madam Speaker Pro Tem. Further discussion.

Thank you, Madam Speaker Pro Tim, uh, call the question, previous question has been called, which effectively ends debate.

Thank you. Um, Madam Speaker pro Tem. Uh, I appreciate the good discussion. I I do want to respond to the, the, the targets from, or the, uh, the comments from my good friend, um, uh, from Orem who talked about this being a tax on Utah residents. This is not a tax on Utah residents. This is a tax on some of the biggest companies in the entire world. And he's right. Businesses want to maximize profits. That's what they're driven to do. And generally we're okay with that, but not on the backs of our children's health and wellbeing. Now, we were lucky enough to know that this isn't hypothetical. In fact, whistleblowers now have, have released a, a, a trove of different documents that show clearly that these companies knew exactly what they were doing. Those documents came out and showed that kids in particular were suffering from significant harms because of their targeted advertising and algorithms. And they asked the question, should we change our algorithms? Should we change our advertising in order to mitigate these harms? And they decided no, that the prophets were more important than our children's wellbeing. In particular, they said that we need to target even more the nine to 13-year-old girls because that was their target audience. And if they didn't get to them right now, that they may never get on the platform. And they changed their algorithm to go after that exact audience. They knew what they were doing. This tax will help change their business motives to, to look after the wellbeing of our children, and also allow the state some way to mitigate the harmful effects that have already happened. This is good policy. It's good for Utah. I urge its support.

Thank, thank you. Um, I, uh, I appreciate the motion. Um, as you'll see, the, the real difference in the substitutes are, is included down, um, in lines starting 1 56 and on with, with the big, uh, change in line 1 68, that public education or awareness campaigns regarding the effects of targeted advertising on children, families, and adults. Back to the discussion to

You. Thank you. Um, Madam Speaker Pro, Tim, you, I, I rise in support of this bill. Um, I initially had, um, some concerns, um, about what might be passed on to businesses. And as I've thought about our role and responsibility in this body to watch out for and to protect our children, I've realized and, and have very strong feelings that we cannot have our backs against the wall by trillion dollar companies, um, who know how to manipulate the system and do so. And we know that because every time, uh, there's social media, uh, legislation that comes before this body, we have all the high powered lobbyists that come to lobby against it. I would urge my colleagues to have the courage today to not look at what people say could happen down the road with pass on of expenses to businesses, but look at what we have the power in this body to do today to protect our children. And I would encourage, uh, the support of this body. Thank you.

Thank you, Madam Speaker Pro Tem. I appreciate the opportunity to speak against this bill. Um, I don't think it does what it's, it's intended to do. Uh, I, I appreciate the sponsor, uh, bringing this before the body. Uh, I, I do agree that, that we do need to protect our children, but this bill doesn't do that. This bill taxes, uh, Utah residents, um, it taxes Utah businesses. Um, and it makes it less affordable, uh, to, to live in Utah. Um, anybody that says that this is not a pass along tax is mistaken. Every tax that that goes to a business gets passed along to the consumer. Every single one except for corporate income tax. That is a fact. Businesses are gonna try to maximize profits and minimize losses, and how do they minimize losses by passing along fees and taxes to the consumer. And so I applaud the effort and what we're trying to do here. We do need to protect our children, but this is a tax on Utahans and I, and I can't support that. So thank you Madam Speaker, Further discussion.

I rise in support of this legislation. As many of you know, colleagues, we are leading the way and we are setting an example to the rest of the nation in this space in protecting our children from social media. In fact, we are named as one of the top national leaders from the, um, childhood index. And so I would plead with you to think about what we can do. Other states are looking to us. They're watching what we're doing, and they're adopting the same policies that we are putting forward. And when we work together to put pressure and push back on these big tech companies, that's when change happens. And I will also add that this is very limited in scope. Not to local businesses, not to Utah businesses, but to large tech, multi-billion dollar companies that are targeting our children for their information for a profit. And I urge you to support this bill. Thank you

Thank you, Madam Chair Pro temp. Um, I rise in strong support of this bill. Um, I went back and forth on this bill because of the idea of attacks. Um, but having worked for the largest digital advertiser, um, I know the harms are real. And currently I'm on a repentance tour. Um, now targeted advertising is very different than when we grew up. When we grew up, there was a newspaper ad, a billboard, a commercial. It was the same for everyone today. These large advertisers, they are collecting massive amounts of data on all of us. What we click on, what we watch, how long we watch, even when we are vulnerable, what we buy, all that data is kept in a profile on each and every one of us. And that is what informs an algorithm. And then that is what shows up on your screens. Now, we talk a lot about the freedom of speech in that battle, but we don't talk enough about the freedom of will. That is what is at the balance is our agency. The ability to choose that is what they are trading trillions of dollars. And their bottom line for is our freedom of will. And so, colleagues, I urge you to support this. Now, this doesn't solve the world's problems of Target advertisings, but I think it's a step in the right direction. And so I, I urge you to support this bill. Thank you.

Thank you Madam Speaker ProAm. I would also like to stand in support of this piece of legislation. This is an important piece of, of legisl of legislation, uh, that we're looking at. IIII, I struggle with the argument that we're taxing small businesses. We're talking, uh, companies who are making hundreds of millions of dollars. Many of them are making $60 million a quarter. These are not small companies that, that, uh, are, are being impacted here. Additionally, we've spent a tremendous amount of time this session dealing with addictive devices, which is where most of your targeting advertising is coming from. We recognize that devices are addictive. We are pulling electronics out of school. We are restricting targeting advertising on our school databases. We have, uh, just passed legislation on sleep studies, which is also impacted by this. We're talking about AI chatbots. All of these things are coming through because they're targeted towards our kids. And we are taking a whole bunch of steps. And what this does is it takes a little piece back and it helps us fight back. It gives us tools and money to fight back and to give the education that is needed for, for the wellness and the of our, of our children and our youth. And so it urge the passage of this bill.

Thank you, Madam Speaker ProAm. Madam Speaker ProAm on the desks of this floor is a handout that, that I have distributed, which outlines a series of advertisements that have been proffered among the public many of these decades and decades ago. And if you look at this piece of paper, you see that it was once commonplace to say that Smoking for Pregnant Women was the way to go. That we could put mercury in our makeup with zero consequence, that we could put our children and wrap them in asbestos and everything would be fine. And as we have moved the regulatory framework away from those problems, we have heard the same tired arguments from those companies that it taxes on a syntax is a tax on consumers. That is what we have heard from those who d who create those poisons for our kids. That this will increase the costs. How many times has those who manufactured poisons are in our homes said those exact same words? Those arguments are tired and they are old. Facebook is the Philip Morris of our day. They are killing our children. This is not figurative. This is literal. And the statistics bear it out. Now, there comes a point in every, when, when we face every sin or vice, and we know that it is wrong, that it becomes the it that nec it becomes necessary for government to step in. When we know a product exists that destroys the lives of our children, it is our obligation to do the right thing to diminish the, the reach of that horrible and horrendous behavior. Social media is not our friend. Social media is a terrible nanny. Social media is not helping this country. It is tearing it down. The least we could do is ask them to pay to put the pieces they break back together in some form or fashion, which is what this bill begins to do. Thank you, Madam Speaker Pro

Thank you, Madam Speaker Pro Tim, uh, call the question, previous question has been called, which effectively ends debate.

Thank you. Um, Madam Speaker pro Tem. Uh, I appreciate the good discussion. I I do want to respond to the, the, the targets from, or the, uh, the comments from my good friend, um, uh, from Orem who talked about this being a tax on Utah residents. This is not a tax on Utah residents. This is a tax on some of the biggest companies in the entire world. And he's right. Businesses want to maximize profits. That's what they're driven to do. And generally we're okay with that, but not on the backs of our children's health and wellbeing. Now, we were lucky enough to know that this isn't hypothetical. In fact, whistleblowers now have, have released a, a, a trove of different documents that show clearly that these companies knew exactly what they were doing. Those documents came out and showed that kids in particular were suffering from significant harms because of their targeted advertising and algorithms. And they asked the question, should we change our algorithms? Should we change our advertising in order to mitigate these harms? And they decided no, that the prophets were more important than our children's wellbeing. In particular, they said that we need to target even more the nine to 13-year-old girls because that was their target audience. And if they didn't get to them right now, that they may never get on the platform. And they changed their algorithm to go after that exact audience. They knew what they were doing. This tax will help change their business motives to, to look after the wellbeing of our children, and also allow the state some way to mitigate the harmful effects that have already happened. This is good policy. It's good for Utah. I urge its support.

Yeah, I actually think the House did a good job with the bill. They added, they added some educational, um, public awareness campaign to how the money could be used. I I, I think they made it the bill actually better and I think what they did, there was a lot of wisdom to it. So I'd move to Concur.