2022 Leg Session, Ari Armstrong, Gold Dome, Media

Armstrong: Democrats advance media hedge fund enrichment bill

Democrats often hate (or at least claim to hate) hedge-fund capitalism. Every reporter in Colorado whom I’ve heard express a view on the matter hates especially Alden Global Capital, hedge-fund owner of the Denver Post, Boulder’s Daily Camera, and various other Colorado papers. Even reporters for the Post routinely take potshots at the paper’s owners. An entire documentary attacks Alden. (I’m not as worried about Alden as some are.)

So, of course, on March 10, various news publishers testified in favor of a bill that benefits Alden Global Capital (among others) and that incentivizes hedge funds to buy up more local newspapers. And every Democrat on the committee at hand voted to advance the bill, while two Republicans voted against.

“I still have this concern that we’re looking at hedge funds, and we’re looking at wealthy entities that would be reaping the rewards from this,” Rep. Kyle Mullica said shortly before voting in favor of the bill. What’s going on here?

Swallowing a bitter pill

The idea is that the bill in question, House Bill 1121, also would benefit other media outlets in addition to those owned by hedge funds and billionaires. So the fact that hedge funds will reap much of the benefit was a bitter pill that various publishers and legislators were prepared to swallow. No doubt if they could have figured out a way to exclude Alden-owned papers they would have, but that would have been so blatantly discriminatory it would have made even Democrats blush. (It also probably would have ended up in court.)

To be sure, the bill does discriminate against other media outlets (perhaps including Complete Colorado) and against many advertising businesses in ways legislators thought they could get away with.

First let’s back up and summarize the bill as amended in committee. The upshot is that it offers tax credits of 50%, capped at $2,500, to select businesses when they advertise with select Colorado media outlets. This directly benefits the advertising businesses and indirectly benefits the media outlets that receive the advertising dollars. But the indirect benefit is the point; the bill is titled “Support Local Media.”

Notably, HB 1121 used to be a lot more ambitious, with mandates for state agency advertising and with individual tax credits for subscriptions or donations to media outlets. (See Corey Hutchins’s review.) But, after the fiscal note came back, House sponsor Lisa Cutter ran a “strike through” amendment to replace the original bill and then an additional amendment to further water it down.

Picking winners and losers

On the advertising side, the bill discriminates against larger firms by saying only “small” businesses with “fewer than fifty employees” are eligible. What’s the rationale for that? As Cutter explained during the committee hearing, small local businesses are likely to buy advertising in their local news outlets. That’s probably true of businesses with local retail or services. But why should larger businesses be excluded? That seems unfair. And larger businesses with a retail or service side also are likely to advertise locally.

The bill covers broadcasters as well as print and digital publications. It draws in “local newspapers,” defined as ones that “primarily” serve Colorado or “a regional or local community within Colorado” and that employ “at least one journalist who resides in Colorado.”

Wait a minute. . . what about Uncle Bob’s QAnon Colorado Blog (to make up an example)? The bill rules out most small operations, bad and good, by requiring that an eligible media outlet be “covered by media liability insurance.” But there’s nothing magical about liability insurance that guarantees quality journalism. That’s just a proxy, the effect of which is to exclude publications that lack substantial financial resources.

The bill also restricts beneficiaries to outlets that “primarily [have] content derived from primary sources related to news and current events.” Presumably this is intended to rule out blogs that lean heavily on other news reports. But the term “primary” here is tricky. The originator of QAnon conspiracy theories is a “primary” source, right? If the media contact for a government agency issues a release or a statement, is that a “primary” source? Undoubtedly Cutter would say yes, even though the spokesperson gets the information from others. But we all know this bill will be interpreted to benefit media insiders.

The bill also excludes media outlets “owned or controlled” by an organization “described” by IRS code as a 501(c)(4) or a 527, meaning a group organized for some political purpose. Thankfully, as everyone knows, media outlets not controlled by such groups never push a political agenda. (Yes, that was sarcasm.)

Democratic Rep. Marc Snyder raised an interesting objection: He pointed out that qualified businesses could work with qualified media outlets to buy advertisements that promote a political agenda or that include “hate speech,” then get the tax credit for it. Cutter said most papers have their own codes to rule out such ads. But the bill does not exclude such ads—nor could it without government explicitly defining what constitutes approved speech.

Although a tax credit is not nearly as bad as an outright subsidy—of which I’ve been very critical—the bill’s restrictions still mean government is putting its thumb on the scales and favoring certain sorts of media over others. If a business wants to advertise with a one-person publication running without insurance, or with a partisan outfit, what legitimate concern is that of the government?

More broadly, why should government create incentives to advertise at all, or to advertise with particular sorts of organizations over others? The bill says legislators wish “to induce certain designated behavior by taxpayers.” But it is not the proper job of legislators to “induce” behaviors that they prefer. It’s their job to figure out how to protect our rights, take care of government’s basic functions, and otherwise leave us the hell alone.

Discriminating via taxes

Still, this bill is a net tax cut for the businesses in question, unusual for Democrats, so arguably a net win for liberty. But if Democrats want to cut taxes, they should just cut taxes across the board, not impose a discriminatory tax regime that benefits some but not others. We should note that, in years that government returns excess funds under the Taxpayer’s Bill of Rights, the tax credits of 1121 will come at the expense of lower TABOR refunds for everyone else.

Targeted tax cuts always are tricky business. Consider another example. Republican Hugh McKean is running a bill to exempt prepared foods from state sales taxes. “Items to be prepared at home . . . are already exempt,” as Sherrie Peif reports. But what about high-end prepared foods? McKean told Peif that he plans to run an amendment–to appease Democrat concerns–to put “a cap on the dollar value that would be tax exempt, so that large corporate parties would still be required to pay the tax.” So we’re still talking about a discriminatory tax system. Ultimately, if I could get rid of all the special tax breaks in favor of lower, evenly applied taxes across the board, I would. Then maybe we could talk about something like tax breaks or rebates specifically for the poor.

Still, I can see why a liberty advocate might like the net tax cut (at least for some) of 1121. On the other hand, the bill starts government down the path of picking and choosing politically favored news outlets. And that makes me extremely nervous. A free media primarily means freedom from government influence.

Right now Coloradans are free to subscribe and donate to media outlets and to buy advertising in them. Various Colorado media outlets already have had great success with subscription and donation models. Journalists should look to private citizens, not politicians, to better-secure their crucial industry.

Disclosure: My wife works in marketing and so potentially stands to benefit from the bill should it pass.

Ari Armstrong writes regularly for Complete Colorado and is the author of books about Ayn Rand, Harry Potter, and classical liberalism.  He can be reached at ari at ariarmstrong dot com.


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