The effects of data theft have been enormous this past year, but the situation is likely to get worse.
Why? Because right now we are looking at the theft of only slivers of fairly traditional information. But we now live in a world where every device and service you consume is collecting data on you. That data can help others rob your house, hijack your bank account, destroy your reputation, and spy on your children. It can out your teenage child as gay, or reveal your psychological issues. It can help others punt you out of a job, or blackmail you over things you did, or things that can be made to look as if they were done by you. Pull multiple sources together and you’ll find that companies store near perfect surveillance of you throughout your day. In turn this information can be leveraged into access which allows others to be able to do things on your behalf, whether it’s activating anti-theft on your car or posting anti-semetic comments to all your friends. Or nude pictures from your Amazon Look.
And if (as?) the government tracks towards authoritarian rule, this information all goes to a state that can punish you for whatever crimes the current regime deems criminal. You realize that Google and Apple keep a near perfect record of who visited Planned Parenthood in a pattern that indicates an abortion, right? That that DNA testing agency you used to see if you were Scottish knows all your pre-exisiting conditions, right? That the affair you and your wife worked through privately is meticulously documented by Uber?
Think about it: 2016 was the year of ransomware, where malicious software was used to lock up people’s computers unless they paid a small fee. Future ransomware will not lock up your computer — it will lock up your life, threatening to destroy it pending payment or a promise to not be making trouble for the wrong people.
Tax the Data
In light of this social threat, you’d think that companies might reduce the amount of risk they pass onto you by limiting the amount of information they collect. But the ad-fueled surveillance model of the modern web has pushed them in the other direction.
To halt this trend, we could regulate data collection, and we could punish data loss to theft more harshly. We should explore both options. But I would like to propose another option as well.
Tax the data.
Tax, yearly, the data that these companies hold on you. Put a sales tax, payable by the companies, on the data they collect from you. Tax them yearly for holding on to that data.
This may sound absurd, but it shouldn’t. Companies have admitted that data is their greatest asset. And data is actually what we are paying for these systems instead of cash. We give them our personal data, they give us services.
Now I’m not a tax genius. But I know that if I did consulting work for you and you paid me with a car, that car is income. It’s taxable. It’s also potentially taxable as property. If at the end of the year I have a bunch of cars sitting around from clients, that’s profit. The IRS doesn’t say, well these are cars, they are not payment. So why when I give Google my personal data in exchange for services is that not income?
So tax it. And because it has worse effects on society than holding on to money, tax it at a higher rate, and in more ways.
Taxing personal data collected from individuals would force companies to make decisions about what data to collect and keep with the externalities priced in. We could imagine pricing data on individuals at about $10/MB, and taxing it yearly at 10%. To remind you: a megabyte is quite a lot of data. The entire text of Shakespeare’s Hamlet is less than a fifth of a megabyte. If Google and Equifax won’t pay $1 a year to hold a megabyte on you, then clearly the social risks of holding that data outweigh the benefits. No one doubts that holding a megabyte of data on someone confers more more social risk than a dollar a year. If that data is not worth that to them, they should let it go.
Will it make tech more expensive? Maybe. But it will make it expensive in the right ways. It will force tech to account for the massive risks they are pushing back on society. And it would fairly tax assets that have flown below the radar of traditional public policy.