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Sept. 14, 2021, 3:57 p.m.

Some questions (and answers) about the Local Journalism Sustainability Act

If the proposed legislation becomes law, it would offer substantial help to many local newsrooms at a critical time.

Research tells us that our democracy relies on healthy local journalism, but we know the industry is ailing. Closures, layoffs, and cutbacks in local news — common before the pandemic, thanks to collapsing ad revenue — have only accelerated. Some in Congress, it seems, would like to do something to help.

The Local Journalism Sustainability Act was introduced this summer and has drawn bipartisan support in the House, along with a flurry of positive coverage from some of the news organizations that stand to benefit. Even many of its detractors in journalism (we’ll get to their well-founded criticism in a minute) would like to see it passed, with some modifications.

It’s worth mentioning in an age of rising hate, harassment, and violence against members of the media that across the political spectrum, local news organizations are more trusted than their national counterparts, especially on the right. (Republicans are nearly twice as likely to at least somewhat trust local news outlets than national ones, 66% to 35%. The size of that gap has tripled since 2016, making local outlets one of the last parts of the news ecosystem broadly trusted across the political spectrum.) The bill, undoubtedly shaped by that partisan divide, is narrowly tailored to benefit local news organizations. Here’s what we think you ought to know.

What is it?

There are three major components to the bill:

A tax credit of up to $250 to incentivize subscriptions and donations to local news. The tax credit would cover 80% of the cost of a local newspaper subscription or donation to a local news nonprofit in the first year, and 50% in the subsequent four years. So in order to earn the full $250 credit, you’d have to spend at least $312.50 on subscriptions or nonprofit news donations in the first year, or $500 in the following four years.

That’s a lot more than what most Americans pay for local news currently. Just 20% of people living in the United States say they pay for online news of any kind, and print newspaper subscriptions have spent the past two decades collapsing. And it’s hard to think of many digital local news subscriptions that cost $500/year. A full-price digital subscription to The Boston Globe, one of the most expensive local newspapers in the country, costs about $360 annually. (A print subscription to the Globe, however, would more than max out the credit.)

Since the incentive is structured as a tax credit rather than a deduction, you wouldn’t need to itemize your taxes in order to partake. (That’s good; after the Trump tax bill made it less attractive, only about 10% of American taxpayers itemize.)

But households that pay no federal income tax are left out. The proposed credit is non-refundable, meaning the 61% of mostly mid- and low-income households that paid no federal income tax in 2020 would be ineligible for it. That number was lower pre-pandemic — 44% of households in 2019, and famously 47% circa the 2012 election — but still considerable.

A tax credit of up to $5,000 for small businesses that buy ads in their local publications. Small businesses could use this tax credit to advertise with local news sites, newspapers, television, or radio. As with the tax credit for individuals, local businesses would foot 20% of the costs the first year and 50% in the following years. So a local business could quintuple their current advertising in Year 1 and double it in Years 2 through 5 at zero net cost. Under the Senate bill, to qualify as “small,” businesses must have no more than 50 employees.

A payroll tax credit to make hiring (and keeping!) local reporters, editors, photographers, and other journalists easier. Unlike some other tax benefits, both for-profit and nonprofit publications could take advantage of this payroll tax credit. And those benefits would be substantial: For a local reporter making up to $50,000 a year, the credit would cover half of her salary in Year 1 and 30% in the remaining years. That’s a lot of money in the context of a local newsroom — and if you use the savings to hire more journalists, you can get tax credits on them, too. (Journalists must work at least 100 hours per quarter to be eligible.)

Wait — is this just for newspapers?

No, thankfully! The bill does refer to “local newspapers” throughout its text, but it clarifies that phrase means any print or digital publication that meets the following conditions:

  1. it primarily publishes “original content derived from primary sources and relating to news and current events” for a local audience
  2. it employs at least one local news journalist who lives in the area the publication covers
  3. its publisher employs no more than 750 employees

There are a few differences between the two bills being considered in Congress. In the Senate version of the bill, publishers could employ up to 1,000 employees and local television and radio stations would also be eligible for the payroll tax credit. (Safe to say that’s one reason the National Association of Broadcasters backs the Senate version.) The House bill specifies that, to qualify as a local newspaper, at least 51% of a publication’s readers must reside within a single state or within a single area with a 200-mile radius.

Nonprofit organizations are eligible “only if the publication of print and digital publications is the primary activity of such organization.” Nonprofit organizations have been spun up to accept donations for many would consider partisan or for-profit operations. The Daily Caller News Foundation is one that springs to mind; though that outlet has no pretense to local journalism and would be unlikely to qualify, it’s unclear how the bill would protect against something similar on a local scale. Could a local political group create an allied news (or “news”) site pushing its message while receiving taxpayer subsidy?

Has this been tried before?

The Local Journalism Sustainability Act is hardly the first time the U.S. government has moved to subsidize journalism. Proponents of the bill like to point out that the Founding Fathers created postal subsidies for newspapers, another “content-neutral” benefit. Public notices are another example of government subsidies in journalism and, more recently, thousands of news organizations received pandemic-related payroll protection loans.

The bill proposes to put the power to decide which local news organizations to support in the hands of news consumers and small businesses. That indirect help seems better than Uncle Sam deciding who gets funds — and how much — but the federal government will still have the power to decide which publications qualify. (Here’s hoping the “pink slime” sites get weeded out.)

Both France and Canada have introduced tax credits for news subscribers in recent years. By allowing nonprofit newsrooms to participate, many feel the U.S. version takes an even more forward-looking approach to supporting the future of local news.

So, is this going to become a law?

The law has repeatedly been described as enjoying bipartisan support. And of the 52 cosponsors in the House, 41 are Democrats and 11 are Republicans. The Senate bill, however, has 7 Democratic sponsors and 0 Republican sponsors.

Supports of the legislation hope that it will be included in the $3.5 trillion reconciliation package — which is likely to pass with few or no Republican votes in any event. At least one component has been submitted to the Ways and Means committee’s markup. I’m no vote counter, so I think the only truthful answer, for now, is…”We’ll see.”

Will this help my local newsroom?

If the Local Journalism Sustainability Act becomes law, it would offer substantial help to many local newsrooms at a critical time. The Baltimore Afro-American has estimated it would receive between $109,000 and $196,000 during the first year and as much as $852,000 over the full five years. Much of that benefit — up to 85% — would be generated by the payroll tax credit.

The executive director of the nonprofit that owns The Philadelphia Inquirer told The Washington Post’s Margaret Sullivan the bill was “potentially the most important legislation for local news in the last hundred years” and that the newspaper could expect to receive $1 million in payroll tax credits if it passed.

“To be clear, this doesn’t merely reimburse them for what they pay in payroll taxes; the newsroom would actually get $25,000 from the government to help cover a reporter with a $50,000 salary,” notes Rebuild Local News, a coalition that supports the legislation. “The bill defines a journalist as almost anybody involved in the production of local news, from photographers to reporters to editors. After the first year, publications could receive up to $15,000 per local journalist.”

The bill has drawn criticism over who it leaves out: communities that are already unrepresented and underserved by news media. “Many poor and working-class people  —  those who need credible news and information most but rarely get it due to lack of access or lack of coverage  —  can’t afford the luxury of a newspaper subscription or contribution,” wrote Tracie Powell, founder of a venture philanthropy that supports news organizations led by journalists of color, in a look at the bill’s impact. “When it comes to having to choose between a subscription and a prescription, low and middle-class families will choose the latter each and every time.”

Powell has said some of the act’s other provisions “reinforce a broken media system,” too. She notes that community news organizations’ reliance on freelancers and other non-staff positions makes it harder for them to capitalize on the payroll tax credit, and that businesses have a history of overlooking publications serving Black and other underrepresented communities when choosing where to advertise.

The bill has also drawn criticism over who it’s likely to benefit. As written, even a one-person local newsroom could benefit from this program as long as it has existed for at least two years. But given that half of the daily newspapers in America are owned by hedge funds, the current bill would also funnel a great deal of money into their pockets, too.

“It is also true that the bravest and boldest of community-serving publications will benefit alongside the shallow, absentee-owned newspapers being stripped for parts by vulture hedge funds,” The Salt Lake Tribune’s editorial board put it while endorsing the proposed bill. “Can’t have everything.”

Photo of U.S. Capitol Building by Andy Feliciotti used under a Creative Commons license.

POSTED     Sept. 14, 2021, 3:57 p.m.
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