Anti-Censorship Bills Could Drive Big Tech Away from States by Killing Tax Breaks

So far, two conservative-leaning states have proposed “anti-censorship” bills that would eliminate tax breaks for Big Tech/social media companies like Facebook, Amazon, Google, and Twitter that deplatform conservative politicians and commentators who violate their terms of use.

In February 2021 in Alabama, Republican state Rep. Chip Brown authored a bill, HB213, known as the “Anti-Censorship Act,” and won over 10 co-sponsors in the Republican-dominated Alabama state legislature. 

That same month, in Oklahoma, GOP state Sen. Nathan Dahm introduced SB 1019 to deny tax abatements to companies “for any year in which they have engaged in censorship activities,” with a fine of $10K per infraction.

Julio Gonzalez, CEO of Engineered Tax Services and a national advisor on tax policy, believes the bills have a chance of becoming law, with other states to follow.

“I believe Oklahoma and Alabama would have the ability to get these laws passed without running afoul of First Amendment laws,” Gonzalez said in an interview. “Certainly, other states will follow, as Gov. Ron DeSantis has already discussed similar laws in Florida.”

In February, Florida Gov. DeSantis proposed fining social media companies that deny conservatives access. In March, Republican Texas Governor Greg Abbott backed Senate Bill 12 (SB12), which would make it illegal for social media companies such as Twitter and Facebook to censor Texans based on their viewpoint; the bill was attacked for being blatantly unconstitutional and clearly preempted by federal law. Also in March, a key GOP Senate committee in Iowa proposed anti-censorship legislation known as Senate File 571, which would ban state and local government contracts or aid for certain companies that censor viewpoints on social media. 

However, these initiatives could backfire on the respective states by triggering Big Tech companies to flee inhospitable tax environs.

“The tax incentive hits to these companies would be massive,” Gonzalez said. “Up to 10% tax credits on total labor costs would be a substantial hit. The potential economic impact of freezing tax incentives for Big Tech in these states could be tremendous.”

In recent years, Google, Facebook, and other tech firms have continued to install more data centers in Alabama and Oklahoma. This proposed punitive legislation could trigger legal challenges from the affected companies.

“I think some of these companies are going to say, ‘[we’re] already here based on these incentives, and now you’re basically removing those incentives,’” said Gonzalez. “They could try to go to the state Supreme Court.” 

Could the sudden removal of their tax breaks drive tech companies to relocate?

“I think it would be a big decision factor,” Gonzalez commented. “There’s no doubt about it.”

In contrast, other states are welcoming data center investment. On March 5, Connecticut Gov. Ned Lamont signed into law long-term tax breaks to data centers, and Kentucky legislators have proposed a similar bill.

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Engineered Tax Services

Engineered Tax Services

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