Assembly Standing Committee on Revenue and Taxation

Want to say good afternoon and welcome to the Assembly Committee on Revenue and Taxation hearing for the two year bills and our first hearing of the New year. I want to wish everyone happy New Year if I haven't welcomed you and welcome back to all of my colleagues advocates, please remember to submit your position letter through the the porthole at least one week prior to the hearing in order for your organizational position to reflect in the Bill analysis.

Pursuant to our Committee rules, bills with fiscal impact greater or less than 150,000, whether in the revenue gain or loss, will not be eligible for a vote immediately after the presentation. With that in mind, today's hearing will consider only two bills. File item number one, AB section 796 by Assemblymember Lowenthal.

Bill will be presented and it's a suspense candidate. After conclusion of our regular ordered Committee business, that Bill will immediately go on the suspense file. In addition, File item number one. Suspense file will include file item number two. AB 1265 by Mr. Haney.

AB 1265 was already heard at a previous hearing and presented here, so will not be presented again. Looks like we have a quorum. I will ask Secretary Ms. Hyland, would you please call to establish a quorum?

[Roll Call] We have quorum.

Great. We have a quorum. Thank you very much. We will now move for our first item on our agenda. AB796. We see Mr. Lowenthal here. Would you please? David, we have one person missing, so we don't. Wait a minute. One moment. Oh, you're correct. Go ahead. The Chair notice we have one absent Member. No, we're good.

But we're good because we have a quorum. We have four Members. Thank you very much, Mr. Lowenthal. You may proceed. We have two witnesses. And I will remind our witnesses we have two minutes each. And we will be holding you to your two minutes. So, Mr. Lowenthal, thank you very much for being with us and you may proceed when ready.

Well, good afternoon, Mr. Chair and Members. I appreciate your attention. We have empirically a mental health crisis in our youth that is directly tied to social media use. This is not a correlation. This is causation. And it is woefully insufficient in terms of research and mental health resources that we have available to us to remedy it.

While the digital economy powering social media grows exponentially in revenue and profit, it's taxpayers that are currently left holding the bag on the repercussions with every year the impacts grow and drag on our budget becomes tougher and tougher to overcome and this trajectory is simply unsustainable. I'm therefore proud to present AB796.

This is a Bill that establishes the California Social Media Accountability act, which would impose a recovery fee on social media platforms based on a percentage of annual gross revenue derived from advertising to recover the costs associated with mitigating the impact social media is wreaking on this anxious generation.

The entirety of the revenue generated will be distributed into a new California Social Media Safety Trust Fund. This Fund will support both existing and new programs that protect California's adolescent residents from the harms caused by social media use. With the mass adoption of social media, numerous serious social media related dangers have emerged.

Current research shows empirically that social media is harming millions of America's children. According to one study, about 43% of young adults have seen self harm content on Instagram. About 33% indicated that they have performed the same or similar self harming behavior as a consequence.

Another study found that new TikTok accounts set up by 13 year olds were recommended self harm and eating disorder content within minutes of scrolling the Apps for you page. Eating disorder content was recommended within eight minutes.

Adolescents who spend more than three hours per day on social media face double the risk of experiencing poor mental health outcomes, including symptoms of depression and anxiety. And of course, young people are spending on average, on average five hours per day. Nearly half of all students surveyed have said they experienced cyberbullying.

The rising mental health challenges amongst our youth have had significant economic impacts as well, leaving the burden on families, schools and taxpayers to cover the cost of treatment and prevention. In 2021, families in the U.S. spent approximately $31 billion in child mental health services, accounting for nearly half 47% of all pediatric medical spending.

From 2017-21, household spending on child mental health services rose 31%. It now costs an average of $4,361 more per year for a family to care for a child with a mental health condition compared to families without such children.

This burden does not just impact the families of children who need mental health treatment, but the cost itself is passed on to every taxpayer in this country.

When our state and Federal Governments in this country when our state and Federal Governments have to dedicate funds to increase mental health care services for children who are enrolled in Medicaid, those with mental health conditions accounted for 55% of overall health care spending, totaling $5.3 billion.

California's youth mental health system is under unprecedented demand and in response our state has dedicated record funding of over $4 billion to expand counseling and school based services and the US government has spent $188 billion supporting school based mental health services and expanded the mental health workforce in high needs districts through the bipartisan Safer Communities Act.

Social media related harms are also imposing a significant burden on our schools, requiring them to use their already limited resources to pay for the harms social media is causing on their campuses. Schools are diverting resources to address mental health crises, cyberbullying and the social media fueled misconduct.

San Mateo County Board of Education had to file a lawsuit against social media platforms TikTok, Snapchat and YouTube due to increased mental health care costs, vandalism, property damage and increased school security. In California, online advertising generated $48 billion in revenue in 2024, with a large AM that coming from advertising on social media platforms.

Taxing social media advertising is not an attempt to make the platforms fully pay for every harm that they may contribute to. Rather, it asks these highly, highly profitable companies to do their fair share by helping supplement the growing costs currently born to taxpayers and our government costs that arise alongside their business models.

A modest tax rate of 1% or even a fraction of 1% could generate tens high tens if not hundreds of millions of dollars for this fund. The revenue generated from this could go into four funds, including an education account for expenditures to ensure that the public is educated on how to mitigate the risk of adolescent social media platform use a mental health care account for expenditures to ensure that children and their caregivers receive mental health care services that support mental health risks.

A research and development account for expenditures to ensure that research and best practices for all programs and services related to adolescent social media safety and a social services account to ensure that children that are harmed through using social media platforms, including but not limited to cyberbullying, sexual predication, human trafficking, receive the appropriate social services that they need.

AB796 implements a proven model to Fund solutions. California has successfully taxed products to Fund related remediation. California's tobacco tax generates revenue that goes towards first five Tobacco Related Disease Research Program and funds UC Tobacco Health Research, recognizing that the product was inflicting societal costs and health care costs, holding the tobacco industry accountable.

We tax alcohol to fund various state programs including public health initiatives. Empirically, social media companies are adversely impacting children's mental health and taxpayers are left paying for it. If we do not pass this Bill or something like it, all of our constituents will continue to shoulder the burden of these costs.

While we have as a state invested more in mental health, why don't we look at a reasonable limited way to have the responsible parties, the large social media platforms, pay for their fair share rather than have these costs subsidized by all of us during the times of budgetary pressures.

Shouldn't we be looking at other revenue streams that are directly related to youth mental health costs? I want to highlight that a big difference between this proposal and overall general taxes, which is how much public buy in, which is how much public buy in there is from our constituents.

The public is asking us to act on this issue. They're asking us for that. The most recent polling reports that the majority of parents are concerned about the mental health of teens today and that parents are cite social media as the biggest detriment to teen mental health.

The same research even shows that the teens themselves, which anyone who interacts with them know that they love their social media. They understand that this is dangerous. The Governor even highlighted this very issue in last week's State of the State address.

Additional polling of California voters indicates that most voters across all demographic groups believe that social media platforms are unsafe for children and that lawmakers need to do more. AB796 has a clear objective to tie social media companies to the negative impacts by ensuring that they're contributing the costs to to the costs associated with these harms.

Last year we held a Bill and we worked over the fall to address possible federal concerns, including regarding the Internet Freedom Tax Act, the ITFA. And we believe that the current Bill protects that Bill from that potential challenge. Thank you so much for your time today and your consideration. Respectfully ask for your aye vote.

And here to testify in support of 796 is Chris Itson, program administrator for the Long Beach Unified School District and Dr. Marsha I'm going to screw this one up Elkhunovich, a pediatric emergency physician, a children's hospital in Los Angeles.

Great. Thank you very much and welcome. You have two minutes each. You may proceed when ready.

Chair Gipson, Vice Chair Ta and distinguished Members of the Committee, thank you for the opportunity to speak with you today. I am here in strong support of AB 796, the social media Accountability Act. My name is Chris Itson and I serve as a district administrator for the Long Beach Unified School District.

Mainly in communication, social media safety, digital strategy. But I'm also a former classroom teacher and I'm also a parent of an elementary school age child in our district. So this is not only professionally my responsibility. But it's something very, very personal and dear to me because it affects my own child as well.

In our schools, the impact of social media is ever present nearly every day across our 83 schools. Site administrators, counselors, district staff, we're responding to incidents that begin online and quickly escalate into real harm on our campus.

Cyberbullying, sexual harassment, drug trafficking, even human trafficking touches into our schools conflicts that disrupt our classrooms and negatively impact our staff and students. And we've seen a dramatic growth and increase in this issue since the pandemic.

And in that this not only leaves me incredibly concerned for our student safety and well being, but as a school district administrator who's directly connected to this work, I want to emphasize how even off campus social media is straining our mental health resources, depleting and diverting staff time, increasing related campus costs.

Our schools and our district staff are doing everything that we can and anything we can, and it's not working because there are things outside of our control that we can't help. This proposal acknowledges that reality.

And similar to California's past response to tobacco related harm, a targeted tax on programmatic advertising would provide critical funding for school based mental health and safety supports where they are urgently needed. This Bill is a meaningful step towards protecting students, supporting our educators and ensuring our schools remain what they're supposed to be.

Places where young people can learn, connect and thrive. I respectfully ask for an aye vote and I want to thank you for your consideration. Thank you very much.

Next Witness Chair Gibson and Members. Thank you. My name is Dr. Marsha Elkhunovich. I'm a pediatric emergency medicine physician at a large children's hospital in Los Angeles where I care for children in crisis every day.

I'm also a parent to four tween and teenagers and a proud member of the Organization for Social Media Safety which is the sponsor of AB796. I'm here today in strong support of AB 796, the social media Accountability Act. In our emergency Department we see real world consequences of social media related harms.

And we've been seeing a huge increase in suicide attempts, self harm, eating disorders, violence, sexual assaults and drug overdoses. These are not just headlines or abstract issues. These are kids who are brought in by ambulances or their parents and friends.

They're placed on holds, they're requiring observation, imaging, medications, consults and sometimes have to board in our emergency Department for days and days because there are very few places that take adolescents and young children with mental health problems. And for most of these acute harms. The costs do not stop just at the hospital doors.

There are taxpayer costs across the system, medical and publicly funded care, county behavioral health services, school and social services interventions, and sometimes law enforcement involvement.

When threats of violence and illegal drug use are involved, families have to miss work, siblings are affected, schools absorb all of this disruption and then Californians have to pay over and over and over again. AB796 is a fair accountability measure.

It asks the platforms that profit from programmatic advertisement on social media to contribute to mitigating the harms that social media causes and through a dedicated Fund supporting critically needed mental health care, among other essential services.

From where I stand at the bedside of the kids when they're in crisis, this Bill is about shifting the costs off taxpayers and towards prevention, treatment and recovery. So I respectfully urge an Iwote on AB796. Thank you.

Thank you very much. Appreciate your testimony. Anyone in the audience wishing to speak in support of AB 796, please line up. Please give me your name, your organization, and this is support only.

Mr. Chair Members Amy Brown on behalf of the California Alliance of the Boys and Girls Club in support.

Thank you. Mr. Chair. Esteban Nunez on behalf of Parents Anonymous in support. Thank you. Thank you.

Nora Angeles with Children now in support. Thank you.

Mark Bergan with the Organization for Social Media Safety sponsored the Bill in support. Thank you.

Good afternoon. Shira Spector for Stone Advocacy on behalf of the Parent Collective Half the Story, the Becca Schmil Foundation, the Children's Advocacy Institute, and Buckets Over Bullying in support. Thank you.

Thank you.

Kim Stone and Stone Advocacy, two groups that did register their opposition late, but asked me to. I mean, their support late but asked me to convey it. Our Common Sense Media and Jewish Family and Children's Services of San Francisco, Peninsula, Marin and Sonoma counties.

Thank you. Thank you very much. Anyone primary witnesses in opposition? Would you please come forward? Primary witness in opposition? If we can ask you to. Thank you very much. Great job.

Thank you very much for joining us. You have two minutes each and you may proceed when ready.

Good morning, Chair and Members of the board Members, I'm Jeissy Lee. On behalf of the California Taxpayers Association and a coalition of taxpayers in opposition to AB796 because it will raise costs for businesses both large and small, increase prices for consumers, and will be met with numerous legal challenges because it would likely be deemed illegal under federal law.

I want to say thank you to the prior witnesses for their testimony. It's really important to share these stories and to hear them, but at the same time, there are a lot of issues with the Bill that also need to be acknowledged. First, I'd like to point out that this is not untaxed revenue.

These businesses already pay income tax on it, and although the Bill may be targeted at large companies, the economic burden will fall on small businesses and consumers.

Like other similarly functioning gross receipts taxes on business inputs, this tax will increase operating costs for California businesses, making them less competitive and manifest itself in the form of higher prices ultimately paid by consumers.

This couldn't come at a worse time as affordability and cost of living are among the most important issues concerning Californians, according to nearly all recent polling. Additionally, this Bill violates the Federal Internet Tax Freedom act, which prohibits discriminatory taxes on on electronic commerce as the tax is on digital advertising, not all advertising.

Should this be enacted, it would be subject to years of litigation, as is happening in Maryland. Maryland passed a digital advertising tax in 2020 and it has been mired in litigation ever since. If Maryland loses, it will be costly for the state and it will owe interest on all refunds of taxes collected under the law, as would be the case for California.

Even if you support this tax, we believe it would be the best interest of the state to wait until Maryland litigation plays out in the courts before considering enacting its own proposal. Because AB796 shares much of the same legal uncertainty as the Maryland tax and will increase the cost of living in California, we urge a no vote. Thank you for your time.

Thank you very much for your testimony. Next witness. Two minutes please.

Thank you. Mr. Chair and Members. Annalee Augustine here on behalf of the Family Business Association of California. We're a nonprofit dedicated to helping California's 1.4 million family owned businesses survive and thrive in the state. We echo the concerns raised by my colleague and the thank you to the previous witnesses for your testimony.

We are deeply concerned though, about the unintended consequences of this proposed tax at an unspecified amount on programmatic advertising. While the tax is aimed at large companies, it is important to recognize that the costs will be passed down and affect the small and family owned businesses that purchase ad space on these platforms.

Many businesses rely on these platforms to promote their products and services in a cost effective, targeted and environmentally conscious way. For many of our Members, digital advertising is the only affordable and scalable option to reach their local customers.

The Committee analysis cites two studies related to this showing 78% of small businesses reported that digital ads generate more revenue than traditional offline ads and roughly four in five small business advertisers believe that digital ads help them compete with larger businesses.

Increased costs in this area could mean fewer opportunities for outreach and higher prices for consumers, or worse, closing businesses that are already operating on very thin margins. We sincerely appreciate the author's commitment to addressing youth mental health. However, for those reasons stated above, we must respectfully oppose this Bill. Thank you.

Thank you very much for your testimonies both today. Next, anyone in the room wishing to speak in opposition of Assembly Bill 796, you, please line up. I'm requesting your name or your organization. And this is in opposition to AB 796 only name your organization and this is opposition. And you may proceed.

Good afternoon. Tim Taylor with the National Federation of Independent Business in respectful opposition. Thank you.

Good afternoon, Chair and Members. Naomi Pajon on behalf of the Computer and Communications Industry Association. Respectfully opposed. Thank you.

Alexis Rodriguez with Cal Chamber, in opposition. Thank you.

Dylan Hoffman on behalf of technet. Respectfully opposed.

Good afternoon. Amy Garrett with California Association of Realtors. Respectfully opposed.

Good afternoon. Sabrina Lockhart, California Attractions and Parks Association and respectful opposition.

Ashante Smith with the Silicon Valley Leadership Group, in respectful opposition.

Good afternoon. Jacob Brint with the California Retailers Association, in respectful opposition.

Thank you. Thank you, Mr. Chair. Members Jonathan Arambel, on behalf of the. Association of National Advertisers, also in opposition.

Thank you very much. Anyone else in the room wishing to speak in opposition? Hearing and seeing none want to bring it back to my colleagues for any questions. Ms. McKinnor

I'd like to thank the author for this Bill. As we look at, as we, as I hear the folks that are in opposition to the Bill, I would have liked to have heard from some of you guys earlier than just the, the opposition.

I would love to hear like solutions on how we're going to keep our children safe because we do all know that there is a problem and that kids are really being hurt. And the state, they come to the states and the counties to help us take care of these babies.

And so we need, we need now not just opposition, but solutions. And with that, I have one question from the author. So print and radio are not being taxed this way when we advertise with them. Why didn't we just put the tax on everybody on radio, print and Internet?

First of all, Assemblymember, it's okay, Mr. Chair, for me to respond, I thank you for saying the words that were in my heart. We need solutions.

This is a crisis when we have a Governor addressing the state saying that we should be looking at draconian measures like are happening in Australia to keep our children offline completely, then we know that we're in a crisis situation. With respect to the opposition voices, I have to disagree vociferously. There's a dramatic difference between Maryland and California.

And that I think comes to what your question is ultimately about the ITFA itself. So the Maryland Advertising tax, it imposes a tax on annual gross revenue derived from digital advertising services, but that applies to any entity. The law applies to any entity with global annual revenues exceeding a million dollars. And the tax rates range from 2&1/2% to 10%. It's a broad form of tax. It covers all form of digital advertising.

And you spoke several times about digital advertising, which is very different than advertising on social media platforms, which is actually what this, what this is actually referring to includes banner ads, search engine advertising, other advertising formats delivered to users in Maryland. And a key aspect of that law is its pass through prohibition.

So their statute explicitly prohibits entities from passing the cost of their tax onto consumers or their advertising. This provision does not do that. Excuse me, that. That provision has been heavily challenged in court, and that is the big part of why that is stuck in court. AB796 takes a significantly narrower targeted approach.

Rather than taxing all digital advertising, AB796 would impose a fee on, in state, programmatic advertising. What's programmatic advertising? That's advertising that's algorithmically driven. It would only apply to social media platform providers, unlike Maryland's tax, that applies to all digital advertising.

And AB796 specifically targets programmatic, which again describes the unique type of advertising that social media platforms use that is algorithmically driven. So it is taking every program, piece of data, every behavior about your kids, about all of our kids, and using that information to come up with advertising. This does not exist outside of the Internet itself.

An important distinction here is that AB796 does not prohibit the fee from being passed on to consumers or advertisers. As I said before, that's the main challenge with the Maryland law. There should be no conflation between those two for those purposes alone.

But the ITFA, the Internet Tax Freedom Act, I think, is what you're getting to, which is supposed to have an exemption. But again, there's a difference between static versus programmatic.

Thank you. And let me make one correction. It wasn't. All the folks that came up to oppose that haven't come. But it would be helpful that before we get to hearings that people come and, and give me some solution to some of these problems. Thank you.

Ms. Quirk-Silva.

Thank you, Mr. Chair and I do have a few questions and a few comments on the revenues that would be collected if this materializes. It says it would be deposited into a newly created social media safety net safety trust fund then, which would then be allocated to education, mental health care and research and development and social services.

You did mention some numbers. Do you have percentages into these different accounts and how are you visioning where these dollars that would be accrued would be used?

Yeah, I think that the most important way to answer this is that the overall percentage is going to be 1% or sub 1%.

Part of the problem that we have is we don't have an exact number of how much revenue is being generated because the largest of the social media platforms that kids use is not a publicly traded company. So that is not publicly information. That's TikTok.

So we can envision a range and the range at 1% or sub 1% would be in the neighborhood of the high tens of millions of dollars, up to 300 to $400 million, which probably would not be enough to address all the costs that we are bearing today to deal with this crisis that is growing on an annual basis and continuing to grow.

So as to the answers of how much is going to work in each bucket, those are things that would need to be worked out. Assembly Member but the important thing of creating this fund associated with it is to make sure that everybody understands this is not a land grab into the General Fund.

These are monies that must be used to mitigate the harms that we're paying right now out of the General Fund and right now out of our school systems. And we lament about how our schools are behind and we're saddling them with more and more weight as we subsidize a multi trillion dollar industry. That's what we're doing.

We are subsidizing a multitrillion dollar industry here that pays zero in taxes. And I must disagree also on the comment that income tax is taken out of this. That's not how taxation works. This would be a cost to those companies and income taxes derived on the other side of that.

Thank you. A few comments.

This is a two year bill and I know that a lots of work happens with two year bills and yet we come back in our very first week back, we are going to be seeing lots of weighty bills and this certainly is. I have heard from chamber of commerce tax organizations of their concern. I appreciate your commentary.

I would, if you give me a personal privilege, talk about this quite a bit in the sense that as an educator for almost 30 years now, being out of the classroom and many times as I was leaving the classroom, we're going to go back to 2016 here, people my age, and I'll just say it, 63 years old.

We were considered the dinosaurs in education because we weren't immediately jumping in with whether it was social media or all of the PowerPoints and just turning all technology into the classroom. Some of us drug our feet because we felt that there was a lot to learn in the 15 years because this started before I came up here.

We now have a base to look at and most of the information coming out there under the education umbrella is not doing well.

When we look at what's happening to our students, we're seeing students, very young students who are 2, 3 and 4 years old, not speaking the way many of us and our own kids did because they're in front of screens.

All we have to go to is our restaurants, to our markets, to our theme parks, wherever, and see phones in front of two year olds and they can navigate. But what's happening is parents and educators aren't speaking. So we see a real decline in language, we see a decline in that communication.

But then we jump to our teenagers, which we think are 14, 15, 16 years old. And yet we know 8, 9, 10, 11 year olds are navigating these systems very proficiently because no one had to push them into it.

At home there was all of this discussion about equity for technology and everybody was gonna have one to one. Well, one of the things we saw with cell phones in these 15 years is parents got them.

We did see some kids not having laptops and so forth through the pandemic, but we haven't had to push families into this. And now to take back the control and to take back the user, it's not just kids, it's adults here. I beg that in this room.

There's probably people in this room that have 5, 6 or 7 hours of usage of their own social media. And you know it, because all you have to do is look at how much time you're on your phone. Now. It's not all social media. Some of it's email, some of it's texting.

But we are on our phones as people for hours now. And so we can seriously use the word addiction. This is an addiction. We have seen what the brain is doing. We have seen that kids who are not supervised are falling asleep with their phones or iPads, whatever technology they are using.

And now there's actually a word for it. And again, I don't know if I'm going to say it correctly because I'm trying to keep up with the trends, but I think it's called droom scrolling doom scrolling doom doom. Okay, Doom scrolling. So what does that mean?

That basically means not just young individuals, but adults are sitting on their phones all day long, not even getting out of bed, and just going through TikTok Instagram. And this is how they're interfacing. And they, in essence, have given up even the idea of any kind of productive day because they are so going down this rabbit hole.

I know, and I'm not. I remember I was a teacher, so I'm not gonna ask for hands. But how many of us have ever thought on a Saturday morning, you pick up that phone that's next to your bed and it's like, oh, I've been on it now for an hour or longer, and you're shocked by the time.

We've got a hand raised here. But I'm so concerned about it that I actually got off all of my apps of any social media before the holidays. I know, and I have to tell you, it was really difficult. And I'm an adult, but the first four days, what was I doing looking for my phone?

I'd ask all of you to try it as an exercise. It is really hard. And one of the reasons I intentionally chose to do that is because I felt like mentally I was really starting to be affected by what I saw online.

So whatever your persuasion is, left or right or conservative or liberal, they will take you down a path where that's all you're seeing. And this was what it's meant to do. So what does this mean in this bill? It means that when we look at areas that we know can affect our health and.

And whether it's mental health or physical health, we have the obligation as legislators to do something about it to respond to the crisis. As you mentioned, we had a tobacco tax. Now, again, that's starting to wind down. Why?

Because what's happened is over the years, people are smoking less because they know that it is not good for their health. We know that alcohol but we even in my tenure here voted on a gun tax and we had the same opposition. Why? Because we see lives lost.

So with this bill, I know any tax is never, whether it's at the local level, the state level, the federal level. Nobody likes taxes, everybody hates taxes. Nobody wants to make taxes for the road repair for their school buildings. And we vote on that all the time. That's why the threshold is always at 2 3rd.

But sometimes you do something that's not, that's not popular. Because with innovation comes responsibility and social media. We are just in the infancies of this about 15 years since everybody has had these and the outcomes right now are poor. I have my only grandchild who's only 2 years old, will be 2 in February.

He is speaking full sentences. And I know I'm being braggy here as a grand, as a grandmother, but why? His parents are very intentional about not having a phone in his hand, not having TVs on, but they have to really work at it.

And we've had holiday gatherings where other kids are coming and they're barely even saying a word or two. And it's actually sad when you have a grandchild who's speaking full sentences and conversation. And I see the parents face and this is something that's preventable, but we have to be insistent on it.

We have to want to be in the space to protect. And again, we're talking about youth who. But it's really us too, because who do they model after when parents are home just on this, on this, on this. And they're not even looking at their kids.

What's the message to their kids and the content that they're seeing is destructive. In Orange County, they opened up a hospital, an adolescent wing of the Orange County Children's Hospital about five years ago. And you think why do they need an adolescent wing? Exactly what you said. Suicides, eating disorders in Orange County. So I appreciate your work.

I know it's been a good amount of time, but I stand with us, standing with families that need these protections.

Thank you very much. Let me simply say I appreciate my colleagues and their comments and want to thank Member Quirk-Silva for one, being a teacher and seeing and observing and appreciate her comments and taking us through this.

I am certainly guilty of spending hours and even in the bed when I can and on my phone as well, and being pulled into the social media crave as well. My question is for the opposition. Small business. Can you talk to me with respect to the small businesses that you alluded to, with respect to advertisement.

And I think you were sharing that some small businesses, they advertise on social media and utilizing social media as part of their advertisement of their businesses. Can you just elaborate a little bit on that for me, please?

Yes. Thank you, Mr. Chair. Social media has been found to be a really effective tool for smaller businesses, especially if maybe you're only in one community. So if you want to just target one community specifically, you're able to do that via social media. And things like an algorithm can help specify a targeted audience.

So a lot of money could be saved because instead of just doing a blanket advertisement that could be found anywhere or other traditional media that are a lot more expensive, you could have a targeted. A targeted audience here that might be the most inclined to become a consumer or a visitor to your business.

So that's one of the examples of how small businesses would use this.

And then so how would this affect those small businesses?

So, thank you, Mr. Chair. Sorry to be more specific to your question, if the social media companies are taxed for the revenue that they get from advertisers, there's reason to believe that that amount of the tax or a certain amount of money, basically the advertising fee would grow up, go up.

So it would become more expensive to use social media to advertise because the cost would just be passed down to those businesses.

Okay. I think, Mr. Lowenthal.

Yeah. With all due respect, I have owned and operated small businesses that buy advertising on social media. And I can also let you know that the.

That the functionality that you spoke of is available on search engine advertising the very same way where you can geofence, where you can target specifically without the problematic concerns that you have on social media. But moreover, Mr.

Chair and Members, I wanted to give a basic understanding of how marketing spend works so that you are not confused by this notion that somehow consumers will pay the cost for a sub 1% increase in advertising buy. When you're marketing a product as a small business, you have an advertising budget.

You don't print money to be able to advertise more. You don't raise your prices to advertise more. You set an advertising budget and you allocate that budget on the various ways that you do advertising. Digital advertising can include search engine, it can include banner, it can include texting and other mechanisms in that.

That direction, and it can include social media. And then, of course, there's offline print advertising, direct mail, radio, television, you name it. Right? Everybody utilizes their full budget and spends the money in the places where they're getting the best return until they get diminishing returns.

There is no conceivable way that I can think of as a business that ran, that spent between 10 and 20 million dollars per year on social media advertising that this could be an increased cost passed on to consumers. It's not possible. This is a free service. Social media is a free service for kids to use.

And let me remind everybody that the end user are not our children and they're not us. The end user is the advertising network. We are the products. Our children are being productized and their data is being sold to the end users, which are the advertisers.

So the question that we should be asking ourselves and the question I did not hear anything from the opposition, witnesses or otherwise, are there harms? Are there harms that are being created? If the answer is yes, who is paying for those harms? We have to pay for those harms.

When you purchase tires in the state of California, you have to pay for a tire disposal fee. That is a cost to bear. Right. When you go on your airlines and you buy a ticket, we all fly up and back.

From those of us living in Southern California, there's a portion of your ticket that's paying for the National Transportation Safety Board to make sure that you're safe while you're online or while you're in the air.

When it comes to clean air, clean water, all of those things, we make sure that the harms are mitigated by the products themselves with a recovery fee. And in this case, you're Talking about a sub 1% recovery fee on a product that doesn't cost us anything to use.

So I have a very, very difficult time listening to fear and threats that have not shown to be the case in any jurisdiction. And there are countries that already have this in place, and we've seen no drop off in digital advertising, social media advertising in those jurisdictions. Thank you, Mr. Chair.

Thank you very much. Any additional questions for any of the witnesses? If not Mr. Lowenthal, you may close.

Well, I appreciate your time. I again want to ask the question I just asked a moment ago, which is, are there harms? We know that there are. Everybody knows that there are. I don't know of a parent anywhere that is not grappling with this.

Rural areas, urban areas, northern part of the state, southern part of the state, all socioeconomic groups, all races. I don't know of a parent that's not contending with this. And in every community, we know of significant harms that have taken place, dramatic ones, ones we don't like to talk about.

But we know that the costs are something we all have to contend with. Because the one thing, the one task of government is to protect its citizens. And we are failing. We are failing with this anxious generation. This is a mechanism, sensible one, that's not about taxing consumers. It's not about harming.

It is simply a recovery fee to pay for the cost that we are bearing. Now that nobody I'm hearing from in this room or otherwise is disagreeing is taking place with that, I respectfully ask for your Aye vote.

Thank you very much. And to your witnesses and to the author, thank you very much for your presentation and for your close. This bill will be referred to our suspense file. Thank you very much. I'm sorry.

Okay.

Okay. Thank you. Having dealt with all the items, under the regular order of business of this hearing, we. We will now take up bills on the suspense file and file item order. We will start with File item number one, AB 796 by Mr. Lowenthal. AB 796 will be held in Committee.

File item number two, AB 1265 by Mr. Haney. We will now take up file item number File item number two, AB 1296 by Assembly Member Haney, which will be referred to our suspense file. It's already in our suspense file for hearing. The chair will recommend an aye vote and the motion is do pass as amended to appropriation.

The amendment is refined and make explicit to section number 41, reporting requirements. I will entertain a motion and a second.

So move.

It's been moved. It's been properly moved. And second, on AB 1265. Madam Secretary, would you please call the roll.

On AB 1265. The motion is due pass, as amended, to appropriations. [Roll Call] It passes. 5 to 0.

That bill passed. 5 to 0. That bill is out.

No, he's not gonna come.

Yes.

Yes. We're good.

Great. The Revenue Taxation Committee stands adjourned.

Thank you.

Okay.