Following up on my previous post, Valuing Social Data [124 Colum. L. Rev. 993 (2024)]:  Amanda Parsons (Colorado; Google Scholar), Taxing Social Data:

Data about people, or social data, powers the digital economy. Social data allows companies to predict and modify human behavior, producing economic value for themselves and wealth for their investors. Tax law systematically undertaxes this now-crucial form of economic value creation. This undertaxation exacerbates inequality and prevents governments from raising much-needed revenue.

This Article makes two key contributions. First, it develops the first link between tax law scholarship and scholarship on informational capitalism to offer a descriptive account of how companies leverage social data to create economic value and how that value escapes taxation.

It reveals how tax law's focus on taxing monetary income and its preferential treatment of capital is at odds with digital companies' distinctive business models, which privilege growth and accrual of social data over short-term profits. This Article thus identifies a fundamental incongruence between tax law's structure and digital business models that allows Big Tech companies like Amazon to escape taxation. It is a failure that corporate income tax reforms-the prevailing but insufficient subject of most current tax law debates-alone cannot solve.

Instead, and second, this Article offers a comprehensive three-part approach to reform: (1) capital tax reforms to capture social data value creation that manifests as growth in company market value, (2) data taxes to capture the intrinsic economic value of social data at the company level, and (3) corporate income tax reforms to account for how digital companies turn social data into corporate money. 

Editor's Note:  If you would like to receive a daily email with links to tax posts on TaxProf Blog, email me here.