Senate Finance Committee urged to reconsider tax on advertising
Tax would have devastating impact on the economy
SNPA has joined NAA, NNA and 44 state press associations in an effort to derail a Senate proposal that would limit the deductibility of advertising expenses.
The joint letter to Sen. Max Baucus of Montana, chairman of the U.S. Senate Committee on Finance, charges that the proposed tax on advertising would have a devastating impact on the nation's economy and on millions of American businesses and urges the senator to reconsider the proposal.
"Our free press has been a model to other nations and is made possible because advertising underwrites much of the cost of bringing news, information and entertainment to all Americans," the letter signed by 47 press associations notes.
"We believe the proposal in the discussion draft would severely undercut the economic power of advertising to generate sales and support jobs. Every dollar of spending of advertising will generate, on average, almost $22 of economic output or sales. The economic consulting firm IHS Global Insight estimates that advertising accounts for $5.8 trillion of the $33.8 trillion in U.S. economic output and supports 21.l million of the 136.2 million U.S. jobs.
"The proposed new section 177 represents a tax on advertising. It would require all advertisers to wait up to five years before they could fully deduct the cost of half of their advertising as a business expense.
"The U. S. tax code permits a business to deduct the cost of advertising in the year it is purchased just as it permits the deduction of other ordinary business costs such as salaries, office rent, utilities and similar expenses. The advertising deduction proposal would be the most sweeping change to the tax treatment of advertising costs in the 100-year history of the tax code.
"The U. S. economy is just beginning to show signs of life after the Great Recession. IHS Global Insight estimates it may be 2016 before we reach the pre-2008 levels of spending on advertising. The proposed tax on advertising would push our economy down at a time when businesses – including newspapers and other media that rely on advertising – are beginning to move forward in a positive direction.
"We urge you to reconsider the inclusion of this tax on advertising as you and your colleagues on the Finance Committee pull together a tax reform package."
Earlier this week, the Association of National Advertisers and the Advertising Coalition said that the ad tax proposals would curtail U.S. business investment and potentially put 1.7 million U.S. jobs at risk. The effects would be felt nationwide across all business sectors.
ANA lobbyist Dan Jaffe said marketers would lose at least 40 percent of their annual tax deduction for advertising if the proposed changes were adopted, and that some $456 billion in U.S. economic growth could be lost.