Commentary

Biden's Infrastructure Plan May Be Problematic For Publishers

President Joe Biden this week introduced a $2 trillion plan to upgrade the country's crumbling infrastructure — and pay for it with the biggest tax increase in generations. The plan promises to offer some benefits for publishers, such as expanding the number of broadband households. However, it's mostly an anti-business plan that will raise the cost of doing business and make labor relations more difficult.

The infrastructure plan includes spending billions on roads, bridges, public transport, ports, airports, rail, water and internet -- all things the country needs to support commerce. Whether that money is spent wisely or squandered by wasteful bureaucracies and their cronies is debatable, but let's assume the spending does pay off by making the U.S. economy more efficient.

Economic growth is good for everyone, including publishers.

More specifically, the $100 billion to upgrade the country's broadband networks could help to increase media consumption, especially for more data-intensive content like video, gaming and augmented or virtual reality. Better broadband access for households would help to expand the audience for publishers, whose advertisers want them to offer more engaging ad formats and consumer experiences.

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However, faster connections aren't likely to make much of a difference for good, old-fashioned text that's still the most efficient way to deliver news and information.

Biden proposes to cover this spending by raising the corporate tax rate to 28% from its current level of 21%, while also forcing multinationals to pay more tax on their overseas profits. The plan partly reverse's President Donald Trump's tax cut from 35% to 21%.
The higher tax rate will change the cost structure for publishers, forcing them to devise ways to pass on the costs to customers, reduce headcount or to be more aggressive about tax avoidance. When faced with a choice of writing a bigger check to the Internal Revenue Service or perhaps using the funds on capital expenditures that reduce tax liability and support longer-term growth, it's almost a no-brainer.

The potentially negative effects of the higher taxes on publishers will become clearer in the next few months. Plenty of critics of the U.S. tax system argue that businesses don't pay enough in tax, but they don't have complete information to make that assessment. For example, the New York Times last year disclosed tax expense of $14.6 million on pretax income of $115.4 million -- for an effective tax rate of 12.6%. That looks a lot lower than the federal rate of 21%, but then again, it may not really reflect what the company really paid. As with every business, the NYT's tax returns are private. Its public financial statements show accounting measures for taxes.

The Biden plan also includes the Protecting the Right to Organize (PRO) Act that would make labor relations a nightmare for publishers. The House last month passed the legislation, and its future in the Senate had been uncertain before it was added to the infrastructure plan.

Billed as the most significant labor legislation in decades, the PRO Act would prevent employers from trying to influence union elections and hiring replacement workers to maintain operations during strikes. It also would legalize "secondary" strikes and boycotts against vendors, suppliers and neighboring businesses, giving the National Labor Relations Board the power to levy fines of as much as $50,000 per violation of the law, among other provisions.

The PRO Act also addresses how independent contractors are classified, using California's ABC Test to determine whether they should be considered as employees instead of gig workers that can't be organized. The implications of the rule are unclear, but I expect publishers will respond to the PRO Act by eliminating their freelancers to avoid legal headaches. Instead, they'll hire a handful of part-time and full-time workers, as Vox Media did in California to comply with the state's new gig-worker law. 

As an aside, I oppose the PRO Act because it would force publishers to reclassify freelancers like me as employees, which I don't want because I have a stable and diverse group of clients. Proponents of the bill say it only applies to freelancers that want to form a union, but the Biden Harris campaign was clear in saying it wants to apply a strong ABC Test for all labor, employment and tax laws. A national ABC Test would dissuade publishers from working with freelancers, harming small businesses like mine at a time when vast numbers of journalists have been fired in a pandemic-weakened economy.

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