Photo by Jo San Diego on Unsplash

[ED: This is one that I’ve been ruminating on for a while. I have a lot of thoughts about a post-advertising/post-algo-driven-feed world. Ping me if this kind of thing interests you. I’d love to chat: 0/5 hats.]

What If We Taxed Advertising?

I recently read “What If We Made Advertising Illegal?“ at Simone.org (which generated considerable HackerNews discussion). It makes a bold case: advertising is corrosive, manipulative, and ultimately harmful to society. It fuels attention-hijacking, undermines truth, and distorts our shared reality. As with other once-tolerated hazards—lead in paint, indoor smoking—perhaps it’s time we called time on advertising altogether.

But what if, rather than banning it outright, we taxed it instead?

Reframing Advertising as a “Bad”

Economics typically deals in “goods” — things with positive utility. But what about “bads”? These have negative utility. Pollution is the canonical example. Others include noise, traffic congestion, and cigarette smoke. These arise from economic activity but impose costs on others not captured by typical pricing systems.

Could advertising be viewed as a “bad”? What if it clutters our public spaces and feeds manipulative platform economies? What if it distorts our choices and erodes our attention? Much advertising appears not informational, but psychological—less about explaining and more about persuading or coercing.

This wouldn’t apply equally to all advertising. A local tradesperson listing services in a community paper differs markedly from a multi-million pound campaign pushing gambling apps or junk food. But just as we tax cigarettes or carbon emissions based on their externalities, might we consider the same with advertising?

Shifting from Prohibition to Pricing

Outlawing advertising altogether is clear and principled, but politically implausible. It would invite legal challenges and generate thorny debates about free speech.

What if we used tax policy instead? We already tax things that generate harm. Pigovian taxes, named after economist Arthur Pigou, are designed to internalise externalities—to make prices reflect true societal costs. Could this logic apply to advertising?

What if we taxed advertising in proportion to its negative impact? More intrusive, manipulative, or psychologically damaging ads could attract higher taxes, while benign or clearly useful ones might pay little or none.

What Might That Look Like?

Perfect measurement may be unattainable, but could we follow the precedent of other Pigovian taxes? Cigarette taxes are rough proxies, yet they shape behaviour. What if we constructed a framework based on several dimensions?

Medium: Taxation varying by channel—billboards at one rate, social media at another, opt-in search advertising taxed lightly or not at all
Intrusiveness: Interruptive formats (pop-ups, autoplay videos) taxed more heavily than passive placements
Targeting: Ads relying on surveillance data paying more than those using contextual placement
Transparency: Ads clearly disclosing their nature and source taxed more favourably
Product category: Ads promoting gambling, ultra-processed food, or addictive digital services facing higher rates due to public health implications

Could we implement a tiered system, akin to VAT bands or carbon pricing? Not aiming for perfection immediately, but starting to price in true costs.

The Platform Problem

What if the biggest issue isn’t the ad itself, but its delivery system? Today’s advertising happens primarily on platforms—Google, Facebook, TikTok—engineered around advertising-funded algorithmically optimised timelines. Might it be necessary to address these business models directly?

Could we develop platform-level taxes, indexed to the proportion of revenue derived from advertising? Might we link levies to measurable societal outcomes—misinformation levels, time spent, psychological health indicators?

We already apply harm-reduction frameworks to alcohol and gambling. Could platforms be assessed similarly?

Would this be difficult to measure? Certainly. Contentious? Absolutely. But the UK’s Online Safety Bill already applies content-risk regulation. Could taxation provide a complementary tool?

Counterarguments

Several merit consideration:

“Advertising funds free services”. True, and a meaningful concern. But is free access worth the societal costs? Might content and service provision be supported through alternative models—subscriptions, public funding, co-operatives, or less invasive advertising?

“Small businesses rely on advertising”. A fair point. Could a tiered system mitigate this? Might low-volume, geographically targeted or transparent advertising be exempt or subsidised? Could we target scale-driven, exploitative advertising rather than small business outreach?

“People can make their own decisions”. Is that truly the case? Modern advertising is designed to bypass rational choice. It weaponises behavioural science, exploits attention deficits, and creates artificially persuasive environments. If we accept that cigarettes impair judgement and tax them accordingly, might the same logic apply to ads engineered similarly?

“Pigovian taxes don’t always work”. True, but they can succeed. Carbon taxes have worked in Sweden and British Columbia. Plastic bag charges have dramatically reduced usage in the UK and Ireland. They fail when set too low, poorly targeted, or undercut by loopholes.

“Advertisers would shift to harder-to-tax channels”. Likely. Influencer marketing, sponsorships, and embedded product promotion are already growth areas. But isn’t that an argument for iterative policy, not inaction? Taxes may not eliminate harm, but could they reduce it and make it more visible?

The Feebate Alternative

Pigovian taxes generate revenue but can be regressive if poorly designed. What if we made the system revenue-neutral through a feebate?

A feebate levies a fee on harmful activity and uses the revenue to rebate beneficial behaviour. Could this apply to advertising?

Imagine a system where advertisers or platforms pay fees based on the intrusiveness, targeting, or psychological intensity of their advertising. The more manipulative or extractive the ad model, the higher the fee.

Where would the rebate go? Perhaps to:

Publishers using low-ad-load, high-quality content models
Platforms prioritising user wellbeing over engagement
Creators monetising via subscriptions, patronage, or low-impact sponsorships

Could this create a self-correcting system? Harmful ads fund a rebate pool that directly supports more ethical alternatives, shifting market incentives without relying solely on government redistribution or blunt prohibition.

Toward a Healthier Attention Economy

If we began taxing advertising as a bad, or implementing a feebate system, what might we expect?

Would business models shift away from hyper-engagement toward sustainability? Might brands think more carefully about where and how they advertise? Could advertising quality improve under scrutiny?

Might public discourse become less polarised, less manipulated by outrage-driven algorithms? Could the internet feel less like a casino, and more like a commons?

None of this is guaranteed. But what if taxation, long a tool of industrial and public health policy, could also be a tool of cultural repair?

Conclusion

The original article rightly identifies advertising as a structural harm. The attention economy has become extractive, not additive. But prohibition isn’t the only path. What if we taxed advertising as the bad it has become? What if we paired fees with rebates? Could we shift incentives and fund better models?

Instead of banning the bad, let’s bill it. And in the process, perhaps we can reward the good as well.

Update: HackerNews discussion here.

Regards,
M@

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First published on matthewsinclair.com and cross-posted on Medium.

#0177: What if we taxed advertising?