House Democrats are keen to raise taxes on corporations, high-income earners, and users of vaping products to pay for their $3.5 trillion spending bill. But they're cutting local newspapers some slack by slipping a special subsidy for publishers into their latest tax proposal.
Under the tax bill released by the House Ways and Means Committee this morning, local publishers would get annual tax credits of up to $25,000 for each journalist they employ, which could then be put toward their employers' share of Medicare payroll taxes. The value of the credit would fall to $15,000 after the law has been in effect for a year.
This would be a refundable tax credit. In other words, if the value of the tax credit exceeds the Medicare taxes a publisher pays, the publisher would receive the difference in the form of a check from the IRS. This transforms the policy from a targeted tax break to a direct subsidy.
These tax credits would be available to local newspapers, defined as any print or digital publication with no more than 750 employees that produces "original content derived from primary sources," that primarily serves a "regional or local community," and that employs at least one local journalist.
A local journalist, in turn, is defined as an "individual [who] regularly gathers, collects, photographs, records, writes, or reports news or information that concerns local events or other matters of local public interest."
The idea of providing an effective wage subsidy to local journalists isn't unique to this bill.
Interest in providing federal aid to struggling local newspapers has surged during the pandemic, as advertising dollars have dried up and as problems at the Post Office meant many publications struggled to get their product to subscribers.
The Local Journalism Sustainability Act—first introduced in 2020 by Reps. Ann Kirkpatrick (D–Ariz.) and Dan Newhouse (R–Wa.)—would have created an identical tax credit to subsidize local reporters' compensation. That bill would have also given tax credits to individuals who subscribe to local papers and to small businesses who buy advertising in them.
"Journalistic endeavors throughout the country face major economic struggles that put the future of many publications in serious jeopardy. These struggles existed before COVID, but the pandemic only made them more severe," said Kirkpatrick in June, as she reintroduced the bill.
The idea has proven surprisingly bipartisan, with 58 Democratic co-sponsors and 28 Republicans. "It has cosponsors as diverse as former Black Panther Rep. Bobby Rush (D-Ill.) and conservative Rep. Louie Gohmert (R-Texas)," noted Rick Edmonds in a column published by Poynter.
Despite its popularity, there are two serious problems with the idea.
The first is that taxpayers are being forced to pay for local journalism they wouldn't otherwise choose to support. Giving struggling outlets government checks only weakens their need to reach readers, or to convince donors of their value.
Theoretically, House Democrats' bill lessens this problem by having their local journalism tax credit expire after five years. It's doubtful, though, that Congress will let such a subsidy expire on schedule.
The second, more serious problem is that it puts the federal government in charge of deciding what counts as a legitimate newspaper and who counts as a legitimate journalist under the tax code. Even the detailed definition included in House Democrats' bill leaves a lot for the taxman to determine. Is a paper publishing enough "original content"? Is it "primarily" local or regional?
Imagine IRS agents poring over a newspaper (or Substack) to see if it qualifies for special tax treatment. Not exactly an image consistent with the First Amendment.
Journalism obviously plays an important civic function. But sustaining it over the long run requires convincing citizens that it provides value worth paying for—not making it dependent on federal benefactors.
Rent Free is a weekly newsletter from Christian Britschgi on urbanism and the fight for less regulation, more housing, more property rights, and more freedom in America's cities.