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Federal back-door Ad Tax in play

Leaders of the congressional tax writing committee reportedly continue to eye eliminating or reducing the federal tax deduction for businesses’ advertising costs, a move that would cost the nation millions of jobs and hundreds of millions of dollars in lost economic activity, as part of their efforts to “reform” the federal tax code.

Specifically, a small GOP-led group within the House Ways and Means Committee is considering a plan that would require 50 percent of all advertising costs to be amortized over 10 years, and 50 percent deducted in the first year of the amortization schedule, according to key players within the Advertising Coalition.

“This back-door Ad Tax is the single greatest threat to our anemic economic recovery and any advertising-based industry at this time and it’s imperative that local broadcasters urge their lawmakers to reject this ill-advised scheme,” said TAB President Oscar Rodriguez.

Texas members of the House Ways and Means Committee include Reps. Sam Johnson, R-Plano; Kenny Marchant, R-Irving; Kevin Brady, R-The Woodlands; and Lloyd Doggett, D-Austin.

Broadcasters are encouraged to contact their lawmakers even if they don’t serve on Ways and Means with a request that they weigh in with committee members and oppose the back-door Ad Tax plan.

Members of Congress can be contacted though the U.S. House of Representatives website. Just enter your zip code in the upper right hand corner to find your Representative and a link to his or her webpage.

Talking points follow and broadcasters are asked to alert TAB with reports on their conversations with members or their aides.

Preserve the current standard business deduction for the cost of advertising

  • The House Ways and Means Committee has developed draft legislation that would impose a tax on advertising. Today businesses may deduct 100% of the cost of their advertising. The proposal would allow only 50% in the year the ad runs and require a business to spread the remaining amount over 10 years. IHS Global Insight estimates this could reduce sales in the U.S. by $446 billion and place 1.7 million U.S. jobs at risk.
  • The Tax Code for 100 years has permitted businesses to deduct the full cost of their advertising, just as it permits the deduction of other ordinary business costs like salaries, rent, utilities and office supplies.
  • Advertising expenditures generate sales activity in the U.S. economy amounting to $5.8 trillion. That is 20 percent of the total national economic output. It also helps support 20 million jobs or 15% of all jobs in the country.
  • Nobel prize-winning economists who have looked at the advertising deduction have concluded that nothing in the economic literature justifies a change in tax policy.
  • It makes no economic or common sense to make businesses pay more for advertising thereby causing a decline in ad spending and the sales advertising generates.

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

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