Legislating Loses: a pathway to making privacy invasion unprofitable

-- By GabrielLopez - 25 Oct 2024

Introduction

Corporations exist to make profits for their shareholders and avoid losses. Many corporations in the digital age achieve this by selling user data. State regulations addressing this practice have increased, becoming a concern to data sellers, yet regulations have failed to curb the sale of private data for profit. Though users are increasingly aware and concerned about their data being used and sold, many end up granting access to corporations in what is known as the “privacy paradox”. The paradox stems from a mixture of most people not understanding privacy laws, failure to read and understand user agreements, and lack of leverage arising from the lack of alternatives. While the increase in regulations has been cited as an industry concern and the majority of Americans want increased government regulation, the outcome is a minimal actual change because the regulations expect users to understand the laws, which they seldom fully do, and actively reject corporate information collection.

Propsal

The solution lies in regulation that would make selling user data unprofitable. A 100% tax on data-selling profits would make continued data sales unattractive as it adds cost while creating no profit. This policy places the burden of understanding and complying with the regulation on corporations as they can more easily bear the burden of compliance rather than expecting users to understand the laws and opt out. While a confiscatory tax rate seems unrealistic, similar rates have existed in modern American history. Between 1939 and 1959, a 100% tax rate was levied on social security beneficiaries who made more than a certain amount. A similar tax rate was seen during 1944-1945 and the Eisenhower presidency, with the top tax rate being 94% and 91%, respectively. The policy’s goal is not to tax businesses to increase revenue, rather the goal is to force the producers of negative externalities, in this case the surveillance of users private data, to internalize the costs of their activity and dissuade them from continuing, as Casey Milligan notes that a 100% tax rate on work had on workers. Current state regulations are centered primarily around users opting out and their rights to delete access or correct their data. Since most readers do not completely read agreements seeing them instead as something to get past, they are unlikely to be able to use their data rights fully. Corporations are better informed than individual users, their actions affect all users, and have a momentary incentive to ensure their own compliance, thus it is more effective to make selling data unprofitable for them rather than giving all users the option to opt out.

Objections

While the above policy seeks to benefit users and remove the perceived harms of data collection, its broad nature causes various problems. First, it does not account for the harm this policy causes to employees. By eliminating all profitability to the activity companies would be encouraged to liquidate the workforce entirely to reduce costs. Furthermore, this proposal sweeps up activity that improves consumers' experiences such as personalized feeds, shopping recommendations, and other beneficial data collection applications would be at risk. Additionally, this proposal ignores that small businesses rely on data collection to market themselves effectively and at lower costs. By enacting this policy, small online businesses and their customers would suffer the knock-on effects. As such, the negative ramifications of this policy would not be isolated to corporations as intended but would affect corporate employees, small businesses, and everyday people. Though people may support more regulation, this policy should not be considered as it negatively impacts all people, and would effectively eliminate rather than regulate the industry.

Rebuttal

The argument that enacting the policy would harm some employees is true, though regulatory job loss is often temporary and be offset by other hiring. While some jobs may be lost as a result, often regulations will create jobs to help with compliance. This may be the case in companies where the data is not directly monetized but used to ensure a better user experience. In industries where data is used to retain users and increase functionality additional staff may be required to ensure that no features which rely on user data are monetized. While data collection for improving user experience may be problematic this policy is focused solely on curbing the sale of user data for profit. As such this policy would not serve to eliminate the data collection industry but to strictly limit and regulate its uses. While small businesses would lose access to some informational tools the same would be true for larger competitors leading to a more level playfield as a result. Additionally, though a confiscatory tax may not share the same appeal as general regulation it would likely retain popular support as a majority of Americans are frustrated that corporations do not pay their fair share and want more regulation on how their data is used. Furthermore there are mainstream proposals for a 100% tax rate, which are more expansive than the proposed policy. As such the public seems open to a confiscatory tax especially as it is limited in scope. However if the 100% rate is rejected the policy can be modified to a lower rate while largely effectuating similar change.

Conclusion

Ultimately, the proposed policy is a step in the right direction that comes with some accompanying cost. The short-term loss of jobs is the most harmful cost of the policy, yet because regulations typically relocates jobs across sectors rather than reducing jobs overall the damage would be temporary. The policy would also result in a new learning curve for online businesses which have become accustomed to using user data. However this would create an equal playing field as all online companies must navigate without user data. Even if all the criticisms about the damage the policy would do were true it would remain worthwhile. While changes in economic activity may occur due to internalizing the negative externality of violating user privacy they serve to better reflect costs that are not currently accounted for.

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