Business

Advertising Groups Cry Foul Over Proposed Tax Changes

Industry associations are gearing up for a fight over reforms proposed in Congress that would effectively cut the advertising tax deduction in half. They say adopting the tax code change would have a devastating effect on the economy.

Industry associations are gearing up for a fight over reforms proposed in Congress that would effectively cut the advertising tax deduction in half. They say the change would have a devastating impact on the industry and ripple effects throughout the economy.

It’s a change the ad industry doesn’t want—not by half.

Proposals in both chambers of Congress go after a key tax deduction relied upon by the advertising industry, and industry groups are gearing up for a legislative battle.

The issue: Last week, Senate Finance Committee Chairman Max Baucus (D-MT) offered a series of draft proposals designed to help streamline and simplify the tax code. One would trim the advertising tax deduction by half—allowing businesses to deduct 50 percent of ad expenses in the first year and then the remaining amounts over a five-year period. Currently, businesses can deduct 100 percent of their advertising costs immediately. The suggested change is similar to one proposed by House Ways and Means Committee Chairman Dave Camp (R-MI) that the ad industry took issue with earlier this month. If there’s any silver lining to the Senate version, it’s this: Baucus’ proposal is slightly better than Camp’s, which would extend the amortization over 10 years.

Advertising groups promise a fight: Several industry associations, including the American Association of Advertising Agencies (4As) and the Association of National Advertisers, have called for a strong lobbying response to the proposed reforms, which they say could severely damage the industry’s economic model. “This is the most serious assault on the economics of the advertising industry in decades,” 4As Executive Vice President Dick O’Brien told AdWeek. “It’s time to employ every weapon in our arsenal to extinguish this very bad idea.” Another group, the American Advertising Federation, noted that the economic impact of advertising permeates every part of the economy “Advertising is viewed as a big New York-LA-Chicago, Madison Avenue-type of business, but it is everywhere in the economy. It reaches into every congressional district,” AAF’s Clark Rector said to The Hill. “It would have a devastating impact, not just for advertising but for the economy in general.”

Industry associations say that advertising affects as many as 15 percent of U.S. jobs in some way—a figure that groups directly affected by advertising, such as the National Association of Broadcasters, say could help the win hearts and minds in Congress.

Rep. Dave Camp, who has proposed ad deduction cuts. (photo by Michael Jolley/Flickr)

Ernie Smith

By Ernie Smith

Ernie Smith is the social media journalist for Associations Now, a former newspaper guy, and a man who is dangerous when armed with a good pun. MORE

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