Utah lawmakers use tax threats to force social media companies to the negotiating table

Legislators working on proposal to regulate social media despite legal hurdles.

(Francisco Kjolseth | The Salt Lake Tribune) Sen. Mike McKell, R-Spanish Fork, is pushing a bill to regulate how social media moderates content, but those companies were refusing to negotiate with him.

When a controversial social media regulation bill passed by Utah lawmakers was vetoed by Gov. Spencer Cox earlier this year, it was with an understanding that those social media companies would engage in good faith discussions on their moderation and user ban practices.

That hasn’t happened and lawmakers are clearly frustrated by a lack of communication.

In the 2021 session, lawmakers narrowly approved SB228, which sought to protect Utah users from what was described as “unfair” moderation practices by social media companies.

The bill’s sponsor, Sen. Mike McKell, R-Spanish Fork, proposed a requirement for social media companies to clearly detail their moderation practices and notify Utah account holders when something they posted was removed and why. The proposal also required an appeals process for users who had content removed and imposed a $1,000 fine per instance if the Utah Attorney General decided to take action.

Despite multiple warnings from industry groups and experts that the proposal ran afoul of federal law and the First Amendment, the bill passed only to see Cox issue a veto for “technical reasons.”

“When we agreed to that veto, we were told that these companies would come to the table, “ said Sen. Curt Bramble, R-Provo. “It’s been crickets from them since.”

Bramble decided it was time to exchange carrots for legislative sticks.

Social media companies enjoy broad federal protections for content posted on their platforms. But, those protections don’t extend to state taxes.

“The state has the authority to tax various business models differently. And if that tax were something nominal, maybe 130% of their gross revenue derived from the state, I think that would get their attention,” Bramble said during last week’s hearing. “We could make it 150%.”

That threat had the desired effect, according to Bramble.

“Since that meeting, I’ve had every lobbyist for all of these companies reach out to me to ask to sit down and discuss this issue,” Bramble said with a chuckle.

The question remains what, if anything, lawmakers can do about online content.

Conservatives have long complained that social media platforms are biased against their political views, despite evidence to the contrary. The issue sprang to the forefront following the 2020 election when former President Donald Trump was banned from nearly every online platform for posting baseless claims about the election being fraudulent and inciting violence among his supporters.

Section 230 of the Communications Decency Act gives social media platforms wide latitude on how they handle user-generated content. It also shields those platforms from legal liability regarding what users post. Any regulations Utah tries to impose on the platforms would be overridden by existing federal law.

The First Amendment protects private citizens and companies from government regulations regarding most speech, which is another major hurdle lawmakers face as they try to craft legislation.

Several other Republican-controlled states have proposed or enacted legislation to crack down on social media companies following Trump’s ban. Florida passed a law blocking social media companies from banning political candidates. That law was blocked in court.

Mississippi, North Dakota and West Virginia have considered allowing private citizens to sue if they are censored on social media. Iowa lawmakers are mulling withholding tax credits for social media companies that censor users.

There’s a hope among Utah lawmakers they can find a solution that passes legal muster and that social media companies can live with.

McKell says there were some preliminary discussions during the American Legislative Exchange Council conference in Salt Lake City earlier this summer but there’s been no progress since.

“There were some commitments to bring forward some solutions. Those solutions have not been brought forward at this point,” McKell said. “We need to continue to work on this issue.”

McKell pointed to a recent Wall Street Journal article revealing Facebook has a secret moderation system that exempts some high-profile users from moderation practices as proof the company engages in unfair practices, which justifies government regulation.

McKell says he will continue to work on the proposal with the goal of bringing a bill to the committee in November.