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Opposition to Ad Tax grows in Congress

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.

At press time, 103 House members – including seven from Texas – had 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 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 in part by House Ways and Means Committee Chairman Kevin Brady, R-Conroe, preserves the full deduction for advertising costs, but the plan relies in large part on a new and controversial border adjustment tax (BAT). If opponents succeed in stripping the BAT from the reform effort, lawmakers could be forced to look at an Ad Tax to make up for cuts elsewhere in the system, among other measures.

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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