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Ad Tax concern grows as Congress ramps up tax reform efforts

 - Broadcasters, advertisers must ACT NOW

Congressional efforts to revamp the nation’s tax code are ramping up, along with concerns that the tax deduction for businesses’ advertising costs may be partially or entirely wiped out. Such a measure would make advertising more expensive, crushing new business creation and overall economic activity while putting thousands of jobs at risk.

To be certain, broadcasters’ bottom lines and our ability to serve our local communities would be severely impacted, making it critically important that every Radio and TV station employee contact their lawmakers immediately to oppose any change to the full deductibility of advertising costs in the year they’re incurred.

Station owners, managers and account executives also should recruit their advertisers as advocates and let them know that changes to the advertising costs deduction could hurt their businesses by making it more costly for them to reach customers and grow. They can join Businesses Against the Ad Tax at no charge for tools to contact their lawmakers in DC and learn more about the issue.

Texas lawmakers on the record
Preserving businesses’ full deductibility of advertising costs in the year they’re incurred is broadcasters’ greatest concern when it comes to federal tax reform, and we’ve found allies in more than 100 members of the House who have gone on record opposing any change to the policy which has been part of the income tax code since it was adopted 114 years ago.

In April, 103 House members – including seven from Texas – co-signed a letter to Speaker of the House Paul Ryan underscoring the importance of advertising to economic activity. They noted that in 2014 advertising supported 20 million U.S. jobs and $5.8 trillion in U.S. sales, and drove 19 percent of the country’s Gross Domestic Product.

The seven Texas Congressmen on record opposing an Ad Tax include:

  • Rep. Blake Farenthold, R-Corpus Christi
  • Rep. Vicente Gonzalez, D-McAllen
  • Rep. Gene Green, D-Houston
  • Rep. Sheila Jackson Lee, D-Houston
  • Rep. Michael McCaul, R-Austin
  • Rep. Pete Sessions, R-Dallas
  • Rep. Lamar Smith, R-San Antonio

The tax reform blueprint developed earlier this year in part by House Ways and Means Committee Chairman Kevin Brady, R-Conroe, preserved the full deduction for advertising costs, but the plan relied in large part on a new and controversial border adjustment tax (BAT). Opposition from multinational retailers and others succeeded in stripping the BAT from the reform effort, forcing Brady and other leaders to look for ways to make up for cuts elsewhere in the system.                                               

A plan developed a few years ago by one of Brady’s Republican predecessors slashed the advertising deduction in half and proposed allowing businesses to spread out the deduction for the remaining costs over the next five to 10 years.

While more of a “backdoor” Ad Tax than a straightforward transactional sales tax, this change would still provide a disincentive for businesses to advertise and defeat the very purpose of tax reform which is to increase economic activity.

More than 60 Texas broadcasters co-signed a letter to the Texas Congressional delegation in February urging them to preserve the current deduction. TAB continues to educate lawmakers about the value of the deduction and importance of advertising to every level of the economy.

Questions? Contact TAB’s Oscar Rodriguez or call (512) 322-9944.

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