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Taxing Digital Advertising Could Help Break Up Big Tech

By MIT Technology Review

August 4, 2021

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Paul Romer is an economics professor at New York University and was the co-recipient of the 2018 Nobel Prize in Economics Sciences.

For the past several years, economists and government leaders have regularly sounded alarms about the dangers of big tech monopolies. Regulators won't work because big tech firms are too powerful, Romer says, while traditional antitrust laws are not well-suited to deal with this problem.

He instead believes a progressive tax on digital advertising revenue, passed by state legislatures, could create a unique incentive for companies such as Google and Facebook to split up their businesses and discourage growth by acquisition.

"I designed a tax where the things they would do to try and avoid paying tax are exactly the things we want them to do. So we want this tax to be progressive," Romer says. "The bigger the total advertising revenue the firm collects, the higher the tax rate."

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