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June 27, 2023, 7:59 a.m.
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If the U.S. wants to boost journalism, it should learn from Canada’s mistakes

“There are other big questions hanging over the program, like whether it has actually helped stave off the collapse of newsrooms.”

The list of policies and laws Canada has introduced to boost its ailing news industry is still growing. New entrants include the Online News Act, passed last week, that prompted Facebook to vow to block news on its platforms in Canada. Earlier initiatives include a sprawling local journalism fellowship program and a set of tax credits for news publishers and individuals.

A new report from the University of North Carolina’s Center on Technology Policy — Rescuing Local News Through Tax Credits: A review of policy in the U.S. and Canada — dives deep into the latter. Issie Lapowsky is a prominent tech journalist and Jason White is a former technology executive, albeit one who proudly serves on the board of trustees for his local nonprofit news organization. (The UNC Center on Tech Policy counts White’s former employer, Meta, and other tech giants among its funders, but the report notes the research was funded exclusively by the John S. and James L. Knight Foundation.)

The report evaluates Canadian tax incentives introduced in 2019 to benefit local journalism, including a hefty payroll tax credit for newsrooms and tax credits for individuals who purchase digital news subscriptions. It’s admirably readable for a thorough report on tax credits! With similar policies being considered in seven states and the federal level in the United States, the report looks at where the Canadians succeeded, where the policies fell short of their intention to boost quality journalism, and where the U.S. might improve upon the proposals.

Lapowsky and White finished their research before Canada passed the Online News Act on June 22 — and before Meta meted out its response of ending news access on Facebook and Instagram. The impact of that legislation is sure to be the subject of future research. For now, Lapowsky told me: “Our research makes clear that the tax credit approach is not a cure-all, so it makes total sense that governments are continuing to look for ways to fund journalism.”

One finding that stood out to the research fellows was just how big of an impact the 25% labor tax credit has had in small Canadian newsrooms. The publisher of The Tyee in Vancouver, British Columbia, told Lapowsky that the news org expects to receive $200,000 in credits, or roughly 10% of the publication’s overall budget. Similarly, the CEO of Canada’s Village Media — which operates local news sites across Ontario — told the researchers, “It’s impossible to say that it has not made a significant positive impact on us.”

The digital subscription tax credit, meanwhile? As Nieman Lab reported last year, it’s been a bit of a bust. The researchers blamed a few factors, including a gap between point of sale and reimbursement for the new consumer, the size of the benefit (a paltry 15% of the subscription price), and the fact the credit only applies to written news, excluding audio- and video-based news publishers.

Legislation including tax credits to boost local journalism has been introduced in seven U.S. states, according to the report:

The authors are particularly interested in states experimenting with local advertising tax credits, which they describe as “more politically appealing” than other forms of tax credits. In Wisconsin, a Republican state representative — a former newspaper editor himself — is sponsoring the tax credit. He believes he can “build a broad coalition behind it, because the credit would go to all kinds of small businesses, not just news organizations,” according to the report.

“At the federal level, lawmakers have framed news tax credits as key to protecting democracy through a healthy press,” the report notes. “This is a worthy goal, but given widespread partisan mistrust of the press it is unlikely to be broadly appealing across party lines. A potentially stronger framing would be to cast the credits as a benefit for small business owners and the broader community.”

For stateside policymakers planning on introducing their own tax credit legislation or considering resurrecting the federal bill, the report lays out a series of recommendations. Those include:

Structure payroll tax credits with the smallest newsrooms in mind. Policymakers should ensure diverse perspectives are represented when drafting criteria for who should qualify for tax credits. These criteria should be content-neutral and should consider models of journalism beyond written news. This diversity should also be represented in whatever entity ultimately decides who qualifies for tax credits. The voices of major publishers are important, since they are also major employers in the news industry. But the voices of smaller newsrooms must be heard as well.

To avoid locking the smallest newsrooms out of these benefits, qualifying criteria should focus not on a minimum number of employees, but on adherence to journalistic norms and commitment to original reporting. Canada’s Independent Advisory Board, while under-resourced, offers a model of this style of vetting

Implement subscription tax benefits at the point of sale[…] Policymakers should consider approaches that offer more immediate benefit to consumers. The think tank Democracy Policy Network has proposed a voucher model, where local governments offer residents a set amount of money which they can elect to distribute to the newsroom of their choice. Another approach being considered on Capitol Hill would be to offer tax credits directly to newsrooms for increasing subscriptions, so publishers could offer a discount at the point of sale.

Impose transparency measures to allow for public accountability. To enable independent assessments of the program’s efficacy and fairness, lawmakers should seek to share as much information publicly as possible with regard to how much money is being spent, the size of the entities claiming the tax credits, and other aggregate data that could illustrate the program’s impact.

Experiment with different tiers of credits for employee retention and growth. One of the challenges facing lawmakers is how to encourage new investment in the local media industry. To address this challenge, lawmakers should consider offering payroll tax credits that are tiered based on whether publishers are simply retaining employees or whether they’re adding new journalists to their teams. Newsrooms that are adding net new journalists would be eligible for a payroll tax credit at a much higher percentage of employees’ salaries.

Continue to prioritize local news over national. Unlike in Canada, legislation in the U.S. has been primarily focused on community news, which is the right approach due to the deep challenges in that space. Legislation should restrict the publishers that can take advantage of the tax benefits to newsrooms that (1) produce original news and (2) that serve the needs of the local community.

Test tax credits for local news advertisers. Lawmakers should experiment with tax credits for businesses that advertise with local news organizations, as proposed by the Local Journalism Sustainability Act. […] Policymakers should track the implementation of this policy to measure how these costs and benefits play out in practice — which suggests it might be best if a state or two tried this policy first before national adoption.

The first recommendation’s reference to “adherence to journalistic norms” poses important questions. Canada, as the report notes elsewhere, has been criticized in some quarters as being “too lenient on frequent purveyors of misinformation, given the program’s underlying goal of protecting democracy.” If similar legislation advances, can the U.S. expect to improve on the Canadian system tasked with deciding what news organizations qualify as real-deal journalism?

“It’s a really tricky line to draw. And it’s even trickier in the U.S. than it is in Canada, because we have the First Amendment,” Lapowsky said. “We feel strongly that any qualifying criteria for implementation of any of these tax credits would need to ensure that the government is not placing its thumb on the coverage. As a journalist, I’m just very sensitive to that. In Canada, the rules are broad enough that it does allow for a wide spectrum of ideological coverage.”

She noted the criticism of some of the news orgs that qualified for the tax credit status, but added, “I think in any system that’s truly content-neutral, that’s going to have to happen.”

The various policies being considered in the U.S. focus on local journalism, which White described as helpful in terms of avoiding the most heated partisan debates. (Trust in media is sharply polarized along partisan lines in the U.S., but Americans generally trust local news outlets more than national ones.)

“I think doing this for national news organizations would be extraordinarily difficult. But when you do it specifically focused on local, you can get into some things…that are non-ideological, such as [the requirement that news organizations] must employ a journalist in the area,” White said, noting that would disqualify most partisan “pink slime” sites. “I would say everyone on the right and left wants the money to go specifically to local organizations.”

The two most common roadblocks to these bills in the U.S. have been cost and a debate over which news companies, exactly, should get the money. Should newspaper chains owned by hedge funds be allowed to benefit, even as they continue to slash jobs and coverage? Should government programs designed to promote democracy and protect news for the future prioritize funding digital-only newsrooms over legacy print newsrooms?

Many proponents of tax credits for journalism in the U.S. are still wrestling with those questions. Foundations and wealthy individuals “tend to place more bets on digital-first and nonprofit news organizations,” as White put it, but lawmakers, state publishing associations, and others making legislative recommendations seem more willing to invest in legacy print publications.

“If you look at the emerging nonprofit news industry, specifically at the local level, and if you look at the emerging digital-first news industry at the local level, you’re not seeing quite enough scale yet where that can be the main player in the majority of communities across the U.S.,” White said. “You’re seeing the majority — or vast majority in some of these states — of journalists still employed by ‘traditional news organizations.’ If the goal is to preserve and protect as much [as possible] of the journalism production that is happening today, and then to grow into the future, you do see lawmakers tending to take a broader approach on that question, and not trying to focus on one subset of the industry.”

The report notes “there are other big questions hanging over the program, like whether it has actually helped stave off the collapse of newsrooms” in Canada, pointing to the fact that Postmedia laid off 11% of its editorial staff earlier this year even after receiving “a multi-million dollar tax windfall.” Ultimately, though, the report finds that “Canada’s model shows that journalism tax credits can have a meaningful impact on newsrooms, but need to be constructed thoughtfully.” The authors suggest policymakers and other interested parties start by reading their full report, available here.

Photo of Niagara Falls by Venti Views used under a Creative Commons license.

Sarah Scire is deputy editor of Nieman Lab. You can reach her via email (sarah_scire@harvard.edu), Twitter DM (@SarahScire), or Signal (+1 617-299-1821).
POSTED     June 27, 2023, 7:59 a.m.
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