Red State Lawmakers Going After Social Media Censorship By Threatening CRE Tax Incentives

State lawmakers concerned over their inability to control Twitter, Google and Facebook's suppression of certain speech are dangling a new threat in the face of social media giants: a promise to end coveted state tax abatements and incentives if tech giants limit speech online for any reason other than violence.

Alabama state Rep. Chip Brown, a Republican, proposed such a bill last month in his state's legislature, and fellow Republican Oklahoma state Sen. Nathan Dahm introduced similar legislation, which would issue fines and terminate state tax incentives for companies that unfairly censor speech, KFOR-TV in Oklahoma reported. 

"It doesn't matter if you are on the left or the right. When you start censoring voices just because you disagree with the content of their political speech, that is wrong and you are heading down a road to tyranny," Brown told Bisnow.

Neither bill has made it through the legislature yet, but both pieces of legislation raise the question: Will political backlash against social media companies eventually impact local economic development?

If the bills gain traction in these Southern states, they could substantially impact commercial developers and communities that are continually trying to woo social media data centers and other big tech infrastructure to low-cost communities through tax incentives and abatements.

Facebook already has 10 server farm facilities in North Alabama, Brown said. 

"I don't want to take jobs away from anyone," Brown said. "We are definitely always welcoming companies in, but what I am saying is we need to be careful in that if we are spending our taxpayer dollars to attract companies that are in effect censoring our own speech, then we are imprisoning ourselves, more or less."

Brown said several legislators from other states angry with big tech censorship — particularly over the belief that certain points of view are being removed from platforms arbitrarily — have reached out to him to learn more about the bill.

"That's my hope. That it will serve as a wake-up call," Brown said. "I have received calls from several different state legislators from other states looking to take this approach and use it in their states, so I think this is the start of a bigger movement."

Brown declined to identify who had contacted him.

Texas has no such bill on the table just yet, but Gov. Greg Abbott and state Sen. Bryan Hughes, also Republicans, have already taken aim at social media censorship with a bill that would give individuals who were banned from social media for political speech in Texas the right to bring legal action.

Florida lawmakers also proposed legislation that would fine social media companies for the unfair removal of a political candidate's content, while also creating a private right of action for end users to sue social media firms for unfairly censoring them, according to media reports.

So far, only Alabama and Oklahoma are proposing a bill that would directly impact tax incentives when dealing with social media censorship. 

States generally have no constitutional power to change how private companies manage and remove guests from their own platforms, but states do have the right to control their own tax incentives, UCLA law professor and First Amendment expert Eugene Volokh said. 

With some tweaking of the language in these proposed bills through amendments to allow for the limitation of defamatory speech, pornography, violence and spam, Volokh says the Oklahoma and Alabama bills, while unprecedented, are constitutionally viable. 

"I think it may be institutionally permissible for a state to say, 'We'll give you an incentive if you provide a real forum for free speech,'" Volokh said. "And if you want to provide a forum for limited speech, which of course many entities do, well OK, but you are not going to get tax incentives for that. I think a state would be entitled to do that."

The impact on commercial real estate in Oklahoma and Alabama and any other state that proposes and passes such a law in the future could be substantial. 

The economic benefits emanating from one Facebook data center can reach the seven-to-10 figure range quickly.

In Texas, Facebook added another 170K SF to its existing Fort Worth data center in December after breaking ground on the same $1.5B data campus back in 2015. The small Texas town of Midlothian also became home to a Google data center, which the platform committed $600M toward building. 

Whether economic powerhouses like Texas and Florida follow Oklahoma and Alabama's lead remains to be seen, but it's clear that some economic development goals are now being pitted against the political backlash against social media companies in conservative-leaning states.

While it may be constitutional for states to use their power to grant and retract tax incentives and abatements to send a message to big tech, it's probably not the best way to do so, longtime developer and CEO of The Peebles Corp. Don Peebles says.

It also carries many unintended consequences.

"As a real estate person, I don't like doing business in states that are trying to regulate rights by withholding incentives and so forth," Peebles said. "I do think governments have a right to incentivize preferred economic activity such as determining if a hotel is economically viable. But, I don't think you can tie economic activity to constitutional behavior. That is an issue for the U.S. Supreme Court alone."

Though he's a Democrat, Peebles admits both parties have taken great umbrage with the unregulated power of social media and the irresponsibility these platforms have shown when removing everything from the profane to the defamatory and political. 

Peebles agrees something must be done at the federal level to ensure laws governing social media keep up with the times, but he says it's not the job of local governments to evoke change by launching an economic wedge between cities and social media firms.

"A big fundamental aspect of our country is the right to free speech," Peebles said. "We can't be discriminatory in terms of who gets free speech and as a result end up cutting off people because we don't like what their ideas are."

But as a developer who has worked with many cities, Peebles says attacking the problem from a tax incentive standpoint is simply the wrong solution. 

"What it's saying is that we are going to use public incentives that are designed to create economic growth and development and to provide jobs and use that program or type of policy to force an action on how a company runs its business," he said. 

While it may have some impact, it could hurt states in the long run, Peebles said. 

"Without massive compliance by other states, then it won't be effective because these companies will just go elsewhere," Peebles said.

"Tennessee will just take them or New Mexico will, but I think this will come to a head a lot quicker because I think there will be a few challenges to this."