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With shutdown over, Congress set to focus on spending, tax reform

 - At risk: tax deduction for advertising costs

Now that the federal government is open again Congress is returning its focus to the budget stalemate that in part prompted the shutdown, including how or whether to fend off the next phase of across-the-board spending cuts known as sequestration that are slated to hit every major federal program early next year.

With everything from national defense to food stamps slated for further massive budget cuts, scores of interest groups are turning up the heat to persuade lawmakers to protect their part of the budget.

While Democrats are proposing a mix of spending cuts and tax hikes to help solve the long running budget impasse, Republicans have vocally ruled out direct tax hikes.  Whether GOP opposition extends to scaling back some longstanding tax deductions is unclear.

“Experience tells us that we must remain vigilant on our key legislative policy interests, and tax policy is especially fraught with potentially misleading positions that parse differences between a tax ‘hike’ and a tax ‘deduction’ and a tax ‘loophole,’” said TAB President Oscar Rodriguez.

“The deduction for advertising costs has been in place for 100 years and reflects advertising’s standing as a key business input and its importance to generating economic activity.”

“Reducing or eliminating the deduction is tantamount to an Ad Tax and would result in long-term damage to the economy – not just advertising-based industries,” he said.

Nonetheless, Republican members of the House Ways and Means Committee are considering taxing advertising in their planned tax code reform.  The measure is one of several options under review, and the “reform” proposal could be unveiled in the next couple months.

TAB has weighed in against the effort to reduce or eliminate the business tax deduction for advertising costs with three Texas GOP congressmen who serve on the committee, but local broadcasters’ input is crucial.

“Lawmakers value their constituents’ concerns above most others so it’s imperative that each broadcaster in these congressional districts speak up today if they haven’t already,” Rodriguez said.

“Please let us know what kind of response you receive.”

Who to contact:

  1. Rep. Sam Johnson, R-Plano – David Eiselsberg
  2. Rep. Kenny Marchant, R-Irving – James Wiliams
  3. Rep. Kevin Brady, R-The Woodlands – Lori Harju

The “asks:"              

  1. Preserve the current treatment of advertising as an ordinary and necessary business expense.
  2. Reject any measure that would alter or deny the current law that permits a business to deduct the full cost of advertising in the year it is incurred.

Talking points:

  • Advertising stimulates sales and jobs in the U.S. economy.  According to a 2010 study by economic consulting firm IHS Global Insight, Inc.:

    - Advertising supported nearly $30.4 billion in economic output and nearly 87,000 jobs in Congressman Johnson’s district.
    - In Marchant’s district, advertising supported nearly $31.2 billion in economic output and nearly 85,000 jobs.
    - In Brady’s district, advertising supported nearly $9.8 billion in economic output and nearly 34,000 jobs.
    - Statewide, advertising drove $496 billion in economic output and supported 1.5 million jobs.
    - The study also revealed that every dollar of ad spending generates $20 of economic output.
  • Advertising revenue is critical to local TV and radio stations that rely on advertising dollars to deliver vital news, emergency information and high-quality entertainment to their local communities.
  • Legislation that could reduce incentives for advertising would be detrimental to broadcasters’ ability to continue to reinvest in their local communities.
  • Advertising revenue is also critical to our country’s economic recovery. Making advertising more costly would not only affect broadcasters, but also the business owners and local companies that rely on a wide range of media to advertise their products and services.

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

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