The (B)Ad Tax Idea That Won't Go Away

Since June, there's been a portion of the health care legislation being considered in D.C. that has gone back-and-forth almost as many times as the bill itself. For the advertising industry, this tennis match has certainly been worthy of the U.S. Open, only with much larger consequences. How large?

The AAF estimates that disallowing the advertising tax deduction would increase the costs of advertising and marketing for affected companies by up to 35%. The ad industry provides $6 trillion in annual sales in the U.S. and 21 million jobs, according to the AAF. - Ad Age; October 21, 2009

Fortunately for the advertising industry, they not only have the AAF and its lobbying efforts trying to persuade legislators to drop this idea, but they have also gotten support from broadcasters and newspapers. These "traditional media" outlets would certainly feel the effects from significantly reduced or even eliminated advertising budgets at a time where they are already fighting over those same dollars being dispersed amongst "new media" outlets such as social media, blogging, and the web. Taking into consideration that it is highly likely that there will be a "government provided" health care option for Americans, our elected officials in D.C. need a plan to pay for it.

Representative Charles B. Rangel, Democrat of New York and chairman of the House Ways and Means Committee, said last month that legislators would consider ending the tax break for drug ads as a way to raise money to pay for the health care overhaul. - New York Times, July 26, 2009

Some legislators are not only using this logic to pay for the "government provided" health care option, but also a way to express their disapproval with this form of advertising entirely.

The proposed legislation to eliminate the tax deduction for health-care advertising is going under the short title of the "Protecting Americans from Drug Marketing Act." - Ad Age; October 21, 2009

Most of us may not have pharmaceutical companies as clients, but the fear amongst many is that it won't stop there.

"Where does one draw the line?" One United States Senator has asked. Would we also tax advertising for vehicles that do not meet emissions or fuel economy standards, advertising for gaming, or foods that do not meet some nutrition standard? - AAF; October 20, 2009

What can we do? Please contact both of your Senators as soon as possible and express your strong opposition to any effort to deny the deductibility of advertising expenses. Some of the names associated with this legislation are: Senators Al Franken, D-Minn., Sherrod Brown, D-Ohio, and Sheldon Whitehouse, D-R.I., Bill Nelson, D-FL, Representatives James P. Moran, D-VA, Charles B. Rangel, D-NY.

Senators can be contacted through the Senate webpage at http://www.senate.gov/ or by calling the Senate switchboard at 202-224-3121.

UPDATE:
Congressman Targets Food Advertising Congressman Dennis Kucinich, D-Ohio, has sent a “Dear Colleague” letter to other members of Congress announcing his intention to introduce legislation to “eliminate the tax deductibility of fast food and junk food advertising directed at children.” The Congressman is inviting other members to join him as a cosponsor.

The removal of any advertising tax deductions will certainly open the flood gates and make the entire industry vulnerable.

Helpful links:
AAF, Alert: Another Threat to Advertising Deductibility
Franken and Senate Democrats Go After Tax Deduction for Advertising
Lawmakers Seek to Curb Drug Commercials
House Considering $37 Billion Drug Tax, Rangel Says