There’s an interested debate to be had about blogging and entrepreneurship with the news that at least a couple of bloggers have been told they need to register as a business, pay for a licence, and pay taxes on their profits in the city of Philadelphia, with the licence costing $300 for life, or $50 for a year. The bloggers in question have earned as little as $11 in two years.
The initial response was that Philly was being ridiculous, as ReadWriteWeb and Marketing Pilgrim both show. But there’s an interesting alternative point of view from Justin Kownacki (shared by Chris Brogan via RSS).
As he says:
‘I don’t know many people who blog and don’t hope for lots of traffic. But what do you need traffic for, unless you expect to (even indirectly) convert them into customers?’
You could claim you want to connect with lots of people to chat and benefit from their shared knowledge as your primary reason, but adverts in sidebars, and the indirect benefits of speaking, consulting, or getting a better job all factor into online publishing.
Justin agrees that the Philadelphia requirement is ‘opportunistic, short-sighted and comically petty’, but asks ‘why are we doing this anyway’.
This isn’t the first time something like this has happened – a laid-off lawyer lost unemployment benefits in New York due to $1.30 a day Adsense ads. Personally I think the most sensible route is the middle ground….
The solution:
Say we define blogging for the moment as sharing stuff for free online for fun, and online publishing as the big money content business. We all exist somewhere on the line between them.
The problem here is that the definition of a business is coming in waaaaaay too far down the line towards free and fun.
Taxation is a useful way for people to contribute proportionally to resources which are shared by everyone, and at a certain point, anyone making money online should be required to pay a set amount of their earnings in this way. But there is a huge difference between a blog which has evolved to support one or more people in a business venture (e.g. Techcrunch, Mashable, ProBlogger et al), and someone making $5.5 dollars per year. And most people running a couple of ads on their blog are going to be in the $5.5 dollars a year camp, meaning they’ll earn more than the licence after about 54.54 years.
If we accept that around 80% of bloggers and people running websites will earn next to nothing, a realistic level of taxation would be when that revenue reaches a significant level – at least 4 figures annually in dollars (And ideally in pounds sterling as well!).
That’s when it becomes something which pays back the cost of hosting, domain names, computer equipment, broadband internet, and conclusively becomes something which makes a reasonable amount of income for the blogger (and also for the city – how many people won’t bother investing time and effort to create revenue for themselves and the city now?)
But as Justin points out, we shouldn’t just dismiss the idea of taxation affecting those of us who are working online to build our own websites and blogs – as more and more people become employed or self-employed in radical new roles in a global digital economy, we need to work with governments and councils to ensure they understand what the hell it is we do, or we’ll end up facing worse decisions in the future…
