Crime & Law

Lawsuit Aims to Block Chicago’s New Social Media Tax. Here’s What to Know

NetChoice, a trade association representing the tech industry, filed a lawsuit in Cook County on March 13 to block the Social Media Amusement Tax included in Chicago’s 2026 spending plan.

Crafted by Mayor Brandon Johnson, the measure forces social media companies to pay a tax of 50 cents per month for every active user after the first 100,000 users, under the city’s amusement tax authority, officials said.

NetChoice in a statement said the tax violates “free speech rights, unfairly discriminates against digital publications, violates federal law and harms Chicago residents and their businesses.”

A spokesperson for the Chicago Department of Law said officials remain “confident the Social Media Tax rests on strong legal footing and will address the matter in court.”

Corporation Counsel Mary Richardson-Lowry told the Chicago City Council before the budget took effect that she was confident the tax would withstand the all-but-certain legal challenge.

Tech companies began paying the tax last month. 

Patrick Hedger, NetChoice director of policy, said the group’s case is backed by the 1983 precedent Minneapolis Star Tribune v. Minnesota. In the case, the U.S. Supreme Court ruled that Minnesota could not institute a tax on newspapers for ink and paper purchased over $100,000. 

“Governments cannot target specific forms of media for special taxation,” Hedger said. “You have an arbitrary size threshold and a tax on a specific form of media. Patently unconstitutional.” 

Hedger also said the mayor’s tax violates the Internet Tax Freedom Act, which President Barack Obama signed into law in 2016. 

“(The ITFA says) you cannot discriminate against an online service simply because it is an online service,” Hedger said. “Any policy that you would apply to an online platform would also have to apply to its offline equivalent. That’s not the case with this tax.” 

Ald. William Hall (6th Ward) supported Johnson’s budget proposal and the social media tax last fall. He said arguments against the tax largely fall flat because companies are already paying it.

“The companies have already been paying it,” Hall said. “My question is, if they are already in agreement with the fact that essentially this is an investment in mental health, then why is an outside group messing with inside business?”  

Social media companies paying the tax does not signal agreement with its legality, Hedger said, adding that newspapers in Minnesota paid the ink tax until the U.S. Supreme Court ruled it unconstitutional and ordered refunds.

Johnson’s tax is projected to raise $31 million, all of which has been earmarked for mental health services in Chicago. Because research shows that social media harms mental health, particularly for young people, the firms profiting from those services should “contribute fair share to fund additional public health and mental health services for Chicagoans,” according to Johnson’s budget proposal.

“It’s no different from the cigarette companies,” Hall said. “For years, they sold cigarettes with no warnings, and people got cancer, and then we had to file major lawsuits to recover the cost of damages done by smoking cigarettes. … (Social media) has evolved into something dangerous.”  

Social media companies’ culpability for adverse mental health outcomes among users remains hotly debated. Most major platforms offer parental controls and require users to be at least 13, though age restrictions are easily bypassed. 

Hedger said local governments should take more responsibility. 

“What we’re not seeing enough of is the state and local governments contributing to online safety education,” Hedger said. “We know that kids and families are going to be online for the rest of their lives, and we ought to be educating people on how to use these services safely.”

NetChoice also argues that the costs of Johnson’s tax will ultimately be passed on to small business owners. Hedger said the higher tax could prompt companies to scale back or withdraw social media services in Chicago, leaving small businesses unable to advertise online.

Heather Cherone contributed to this report.

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