Digital Ad Tax Kicks Off $2.5B Education and Journalism Funds in 2026

The “Education Not Endless Scrolling Act” is aiming to fund major education and journalism initiatives by hitting the biggest players in digital advertising with a brand-new federal tax starting in 2026. Think of it as a policy trade-off: trading banner ads for books and job skills.

The Big Tax: 50% on Excess Ad Receipts

This bill establishes a new tax targeting companies that host digital advertising services—that’s everything from banner ads and search results to sponsored shopping links. Crucially, this tax only applies to “covered taxpayers,” defined as companies that pull in at least $2.5 billion in U.S. gross receipts from those services in the previous year (Sec. 2). That’s a high bar, meaning only a handful of the largest tech giants will be affected.

The tax rate is where things get interesting: it’s 50 percent of the amount by which a company’s U.S. digital ad receipts exceed that $2.5 billion threshold. For a company clearing $5 billion in U.S. ad revenue, that’s a massive new tax bill on the amount over the threshold. This kind of high marginal tax rate on receipts could pressure these companies to either absorb the cost or, more likely, pass it along to the small businesses and brands that buy their ad space. If you run a small business relying on targeted social media ads, watch out—your cost per click might be about to climb.

Three New Trust Funds: Where the Money Goes

This new tax isn’t just going into the general pot. The bill immediately carves up the revenue into three dedicated trust funds, with one-third of the total tax revenue going to each, starting after December 31, 2025 (Sec. 3, 4, 5). This mechanism is designed to provide stable, automatic funding, bypassing the typical annual budget battles in Congress.

1. Direct Funding for Job Skills (CTE)

One-third of the tax revenue is automatically funneled into the Career and Technical Education Support Trust Fund. This money is immediately available to fund programs under the Carl D. Perkins Career and Technical Education Act (Sec. 5). This is a big win for trade schools and high school CTE programs. If you’re looking to get into welding, advanced manufacturing, or specialized IT fields, this fund means a guaranteed, non-discretionary boost to the programs that train you.

2. Tutoring for Title I Schools

Another third goes to the One-on-One Tutoring Trust Fund. This money is earmarked to fund a new competitive grant program administered by the Department of Education (Sec. 4). These grants are specifically for State educational agencies to support individual student tutoring programs in “eligible schools”—which are defined as schools receiving funds under Title I of the Elementary and Secondary Education Act (Sec. 6). Essentially, this targets extra learning support directly toward students in high-poverty schools.

3. Local Journalism’s Conditional Cash

The final third is dedicated to the Local Journalism Preservation Trust Fund. However, this money is locked up. It cannot be spent until Congress passes a separate, new law creating a tax credit either for local news entities to hire journalists, or for small businesses to advertise in local news outlets (Sec. 3). If Congress doesn’t pass that enabling legislation, this dedicated revenue stream just sits in the Treasury. It’s a dedicated funding source with a major political hurdle attached, meaning local papers might be waiting a while for that cash infusion.

The Fine Print on Enforcement

The bill also gives the Secretary of the Treasury significant regulatory authority, including the power to impose a penalty fee on any digital advertising service that “deliberately advertises or promotes the use of virtual private network (VPN) services” for the purpose of evading this new tax (Sec. 2). While the intent is clearly to stop tax avoidance, this broad authority raises questions about how the government would define “deliberately promotes” and whether it could inadvertently affect legitimate VPN use or advertising.