Omri Marian (UC-Irvine; Google Scholar), Taxing Data, 47 BYU L. Rev. 511 (2022):
The Article offers a new theory of tax on data collection and transmission as a primary source of government revenue. This tax does not depend on the monetary value of data. This “data tax” can supplement, and in some instances replace, income taxes. The data tax can (1) mitigate some of the failures of income taxes in a globalized data based economy, and (2) serve to alleviate some of the externalities of a data based economy.
The Article advances the following four arguments. First, current challenges to tax systems stem largely from the fact that traditional models of taxation were designed for an economy in which the location of labor, the ownership of capital, and the monetary value of income were identifiable. These assumptions no longer stand in the modern economic environment: the data economy. Today, one the most significant sources of value creation is the analysis, manipulation, and utilization of large quantities of dispersed data. In so called “data-rich markets,” source, ownership, and value are not only hard to identify — they are not always economically meaningful concepts.
Second, current responses to the tax challenges of the digital economy constitute — for the most part — efforts to identify proxies for the location in which monetary profits are created, or to identify the owners of such profits. The results are attempts to keep taxing the economic components of income (consumption and savings). Instead, this Article posits that one must look again at the normative goals of taxation, and question whether taxes on savings and consumption are still the best functional instruments to achieves such goals. The Article argues they are not. Income tax is only theoretically justifiable where it is the best proxy for ability to pay. In a data economy, monetary income is not necessarily the best instrument to measure ability to pay.
Third, to address such challenges, the Article offers a framework of tax on data collection and transmission. The tax does not depend on the monetary value of such data. Data ta x is a suitable instrument to achieve the primary normative purposes of taxation. Moreover, tax on data can alleviate some of the challenges that the data economy presents to democratic institutions.
Fourth, data tax can be designed to be fair, efficient, and administrable. The Article offers various possible tax instrument designs in which data (rather than savings or consumption) is the tax base.