August 05, 2005
Taxing Internet Porn
Posted by Victor Fleischer

Paul Caron points me to S.1507, a Senate bill that would impose a 25% excise tax on Internet porn. 

Is it good policy?  I'm sure my libertarian friends will freak out, but the policy doesn't sound so bad to me.  The bill is premised on the notion that teenagers are heavy consumers of internet pornography, and teenagers and younger children are often victims of the industry.  These are unfortunate negative externalities of the product, and taxing a harmful product is one way to reach a socially optimal outcome without having to regulate the activity out of existence.  Funds generated by the tax will go to things like a cyber-tip line and a task force to investigate internet-related crimes against children.

Complicating matters is the bill's questionable constitutionality. The Supreme Court has not been friendly to Congressional attempts to regulate internet porn.  And the Supreme Court has, in the past, struck down taxes that differentially burdened constitutionally protected speech.  See Minneapolis Star v. Minnesota Commissioner of Revenue, 460 U.S. 575 (1983). Still, the tax here seems targeted at addressing the negative externalities caused by the activity, not at stifling the speech for the sake of stifling speech.  It probably helps that the funding is mostly earmarked for law enforcement activities, not general revenue.  What's not at all clear is how Congress came up with the number of 25% and whether this bears some reasonable relation to the externalities caused by the activity.  It is an excise tax based on revenue, and surely if the number were 100% the Court would strike down the bill as an unconstitutional restriction of protected speech.  I don't know enough First Amendment jurisprudence to know how hard the Court will scrutinize the reasonableness of the tax and how it is targeted, and my semi-educated guess is that the tax would survive scrutiny, but it seems likely that an Internet Porn tax will be subject to judicial scrutiny in a way that a fat tax would not be. 

Of course, this being Congress, there's some question whether dedicating funds to cyber-tip lines, etc. is mainly for show.  The wheels start to fall of the wagon as you move further down the bill. The tax will generate a lot of money, and perhaps the bill's drafters were struggling to figure out where to send remaining funds.  Section 212(a)(6)(A), after moving down the cascade of recipients past law enforcement, R&D (to develop better filtering software) and educational training, includes the following provision:

    (A) FEDERAL AGENCY SUPPORT- 50 percent of remaining amounts shall be used to provide funding to support child Internet safety activities, as well as activities combating sex trafficking and sex crimes against children, on the part of the following Federal agencies:

          (i) Department of Justice.
          (ii) Department of Commerce.
          (iii) Department of Defense.
          (iv) Department of Education.
          (v) Department of Health and Human Services.
          (vi) Department of State.
          (vii) Department of Homeland Security.
          (viii) Department of Treasury.
          (ix) Department of Agriculture. [(?) --ed.]
          (x) United States Postal Service.
          (xi) Federal Trade Commission.
          (xii) Federal Communications Commission.
          (xiii) National Aeronautics and Space Administration.

Yes, to protect children from sex crimes and sex trafficking, let's get NASA on the case.  We all know what happened when Cartman was abducted by space aliens, and your child could be next.

UPDATE:  Eugene makes a strong argument that it's unconstitutional.

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My friend and colleague (and fellow Kozinski clerk) Victor Fleischer (Conglom ..." [more] (Tracked on August 5, 2005 @ 11:28)

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