Texas Ad Tax Passes Key Test

WASHINGTON, D.C. A Texas measure to raise money for the state’s school system by placing a 5-8 percent tax on advertising services and media passed a key state Senate committee vote on Friday. The bill, introduced by Texas Lt. Gov. David Dewhurst, will now go to the full Senate floor.

Advertising trade groups are worried that the proposal, which is expected to be structured as a constitutional amendment for the November general election ballot, is on a fast track for passage.

More than a dozen other cash-strapped states have either adopted similar proposals or are considering them. Connecticut passed an ad tax on creative services in February to help fill a nearly $900 million budget deficit. Nebraska is considering a proposal to repeal its current tax exemption for ad services while New Mexico has proposed placing a 20 percent surcharge on all prescription drugs that have been advertised.

The American Association of Advertising Agencies and the Association of National Advertisers have hired a lobbyist to fight for a repeal of the Connecticut law. Meanwhile, the 4A’s and the American Advertising Federation are urging their members to contact their Texas state senators to express opposition to the Dewhurst proposal.