DOSSIER D.C.: THE NEXT WAVE By ALAN PELL CRAWFOR

The first swells from Clinton's tax plan barely touched the ad industry. But with a $90 billion health care plan looming, that will likely, change. Bill Clinton is

Go figure.
And while you’re figuring, tell me if the spending cuts he proposes are going to match the tax hikes he wants. Nobody here seems to think so. The plan Clinton proffers seeks $3 in taxes to every $2 in cuts, and that’s if Clinton gets everything he wants. ‘What concerns me,’ says Wally Snyder of the American Advertising Federation, ‘is whether the spending and the cuts are going to balance out as this stuff is fought over in the next few weeks.’
They won’t, Wally. There’s no way they can. Especially since the White House will be asking Americans to ‘contribute’ (as the President likes to say) up to $90 billion more in new taxes within weeks. That request will come when the First Lady puts forth her health care plan, which was conveniently left out of the President’s State of the Union address, as was that colossal price tag. Also left out of the speech were some two dozen new taxes Clinton’s advisors have kept in storage for use as additional revenue-raisers to pay for the program.
It’s those taxes, some of which Clinton’s advisors still won’t talk about, that have ad industry lobbyists here quaking in their tasseled wingtips.
And with good reason. On Feb. 25, Clinton admitted what many of his aides have been hinting at for weeks. He’s not ruling out ‘sin’ taxes, specifically cigarette taxes, to pay for the health care program because ‘health-related taxes are different.’
Once he starts hiking taxes on cigarettes as a way to curtail consumption, lobbyists fear he’ll cut back on advertising for such products next. The writing’s on the White House wall. ‘We were of course relieved that advertising wasn’t mentioned in the State of the Union,’ says Hal Shoup of the 4A’s. ‘But there were things in the package that concern us nonetheless. We aren’t at all happy with the President’s willingness to raise revenues by changing the rules on deductibility of legitimate business expenses, like reducing the meals and entertainment allowance and the lobbying deduction. When they start doing stuff like that, you’ve got to be concerned that they’re going to go after advertising deductibility next.’
Adds Dan Jaffe of the Association of National Advertisers: ‘There’s been an advertising tax of one kind or another in every major tax bill since ’86, and with all this new spending, it’s hard to imagine there won’t be one or more ad taxes proposed this time, too.’
Clinton is making no secret of the fact he suspects some businesses do too much advertising. ‘The pharmaceutical industry is spending $1 billion more each year on advertising and lobbying than it does on developing new and better drugs,’ he claimed while barnstorming for medical cost containment in early February.
(For now, the drug industry is treading cautiously. Says David Emerik, a spokesman for the Pharmaceutical Manufacturers of America, ‘In no other industry is the advertising function more important than with pharmaceuticals.
Placing limitations on advertising would be inconsistent with the administration’s goals of enhancing the quality and scope of health care for all Americans.’)
We’re going to be hearing a lot of this industry-specific tax tune in the weeks to come from our sax-blowin’ chief executive, who has assembled a pretty loud backup band to help him.
Senator David Pryor, Clinton’s predecessor as Arkansas governor, also wants ‘to reduce unnecessary and wasteful expenditures on drug promotion, marketing and advertising.’ Pryor is a liberal Democrat.
But Senator Bill Cohen of Maine isn’t. Cohen, a thoughtful and literate fellow who may well be the only published poet in America who is a registered Republican, says he, too, wants to ‘restrict the amount that can be deducted for advertising as we do with tobacco.’
Cohen’s wrong, of course. We don’t restrict the deductibility of tobacco advertising. Not yet, anyway, which is what makes Cohen’s almost offhand comment, uttered on NBC Nightly News, so significant. He seems to think the restrictions are a foregone conclusion. Cohen may be wrong, but he is certainly not stupid. Senator Tom Harkin of Iowa, whose bill to cut the deductibility of tobacco ads to 80% was defeated last year, plans to introduce it again. Its prospects might be better under a Clinton administration that will be trying to raise money (and keep people from smoking) any way it can. You can bet the notion has Miz Hillary’s support, and if it has Miz Hillary’s, it probably has her hubby’s, too.
Copyright Adweek L.P. (1993)