Congress has passed federal income tax reform legislation with no mention of an advertising tax. Newspaper publishers and others who depend on advertising for their livelihood can breathe a sigh of relief.
As tax-writers scrambled for new revenue lines to “pay for” tax reform, the idea of slashing the deductibility of advertising once again reared its ugly head. That resulted in a storm of opposition from advertising-dependent industries such as newspapers, broadcasters and marketing agencies — not to mention client businesses that rely on advertising to make their cash registers ring. Thanks to pressure from both the paid lobby and the grass roots, lawmakers quietly backed away from this destructive idea.
Analysis By Mike Hodges and Donnis Baggett
Texas Press Association
TPA was among the media organizations fighting the ad tax, and emails and letters from our member publishers were an essential element of our strategy. If you made phone calls or sent emails and letters, thank you. They most definitely made a difference.
This isn’t the first time an ad tax has been floated in Washington, and it probably won’t be the last. The idea pops up whenever there’s an attempt to simplify the tax code by clamping down on deductions.
Proponents usually characterize deductions as “loopholes” or “subsidies” that help a fortunate few and harm many more.
One taxpayer’s loophole is another’s bread and butter, however.
Many of America’s most successful businesses are built around the assumption that their goods and services can be advertised at reasonable rates. If tax policy were to change and those businesses could no longer deduct their advertising costs as an ordinary business expense, it would amount to a drastic hike in ad rates. Only the government would reap a benefit — and only temporarily, at that. The effective hike in rates would prompt many businesses to cut their advertising buys. Less advertising would lead to a decline in sales. And declining sales would easily lead to a recession.
Such a scenario would be devastating not only to media companies, but to businesses of all stripes — and to the hard-working taxpayers they employ. That was the core message our side delivered to Washington: Advertising is, indeed, an “ordinary” business expense. You tinker with it at the nation’s peril.
That frightening scenario won’t be enough to kill the advertising tax for good, however. The next time tax writers start turning over rocks looking for new revenue, we’ll need to gear up for battle once more.
Protecting members in battles like this is one of the primary purposes of a trade organization. TPA is proud to lead the campaign for its members — and to help our members don their battle armor to join the fight when necessary.
That was certainly the case over the past few weeks. Thank you for being there when you were needed most.
We hope you enjoy a merry Christmas and a prosperous New Year. But keep your armor close at hand.