Will Ad Tax Deduction Come Back in Play With Baucus’ Exit?

Advertisers aren't taking any chances

There is more reason than ever for the advertising and media industries to keep a closer eye on Washington these days now that Sen. Max Baucus (D-Mont.) has announced he will retire in 2014. The powerful chairman of the Senate Finance Committee has made it all too clear that he sees tax reform as a top priority. And that means that once again, the corporate advertising tax deduction could come back in play.

"They're going to get tired of me," Baucus told The Washington Post about his efforts to end the Congressional stalemate over tax reform proposals. 

Baucus' exit means that both chambers now have powerful lawmakers who have nothing to lose by pursuing an aggressive agenda on tax reform. Rep. Dave Camp (R-Mich.), the chairman of the House Ways and Means Committee, is term-limited and the influential lawmakers have already joined forces, holding several meetings on tax reform.

"They could be freed to be much bolder in their approach than they would otherwise be if facing re-election, or continuing as committee chair," said Clark Rector, evp of government affairs for the American Advertising Federation.

It's also about leaving a legacy. "Chairman Baucus and chairman Camp are more determined to create a reform package that they can look back upon with pride," said Jim Davidson, a partner with Polsinelli Shughart who represents advertisers.

While Baucus' and Camp's determination to get something done does not necessarily mean that the ad tax deduction will become a target, advertisers aren't taking any chances.

"We're not lowering our guard," said Dan Jaffe, the evp for the Association of National Advertisers. "We should raise our efforts even further to be on the safe side."

The advertising industry has already taken pre-emptive moves to fight off this issue, which has come up periodically in various states for 20 years. Already this year, advertisers have managed to push back proposals in Louisiana, Minnesota and in the Ohio House. 

Advertisers are also prepping fresh data to show lawmakers the impact of advertising on the economy. According to a 2010 study from Global Insight, advertising is responsible for $5.8 trillion of the nation's economic output—20 percent of the $29.6 trillion total—and supports 19.8 million jobs.

"We think coming after advertising is totally counterproductive when you're trying to get the economy moving and generate jobs," Jaffe said.

Speaking to members of the American Advertising Federation last week, Davidson warned: "There is only one issue out there and it is taxes on advertising."