Broad tax reform may be a long shot in Congress, but the advertising community is still nervous about proposals to limit the advertising tax deduction. Until the threat is killed in both the House and Senate, the Association of National Advertisers and the Advertising Coalition won't let up on lobbying, releasing a new study that claims that putting significant limits on the ability of businesses to deduct the cost of advertising could place at risk 1.7 million jobs and $456 billion in sales over the next five years.
The current congressional proposals "are the most wide-ranging and destructive the ad industry has faced," said Bob Liodice, president and CEO of the ANA, in a press conference this morning.
Two tax reform proposals emerged last year. One, from Sen. Max Baucus (D-Mont.), chairman of the Senate finance committee, would allow businesses to deduct 50 percent of ad spending in the first year with the rest amortized over five years. The House proposal outlined by Rep. Dave Camp (R-Mich.), chairman of the Ways and Means Committee, is similar but forces businesses to amortize half of advertising spending over 10 years.
By the end of last year, House leadership pushed back against tax reform and the momentum for Baucus' proposal was slowed when President Obama nominated him as the next U.S. Ambassador to China.
But while it may be slowed, until it's out, the limits to the ad tax deduction are still in. "One of the unique aspects of the tax reform process is it's iterative and layered. Once a committee forms the process and lets it sit out there, it becomes a pot of gold for future reformers, even if the first effort doesn't go anywhere," said Jim Davidson, an attorney with Polsinelli Shughart for the Advertising Coalition, which represents advertisers, ad agencies and media. "It will keep coming back. That's why it's important to get it off the table."
"One of the critical things about this study is that we can take this down to the congressional level and show lawmakers how advertising affects their district," said Dan Jaffe, evp of the ANA, who added that the coalition met with 80 members of Congress and their staffs last year on the ad tax.
IHS Global Insight conducted the study for the ad groups. Among the findings, it provides some nice big numbers that show advertising's contribution to the economy, a contribution that could jeopardize an economy just now pulling out of the recession. In 2012, advertising accounted for $5.8 trillion in U.S. economic activity, a figure that will grow to $6.5 trillion by 2017.