In a letter addressed to House leaders, 87 lawmakers stated their position that the tax code should not be revised to modify the current tax deduction for advertising.
“For more than 100 years, advertising expenditures have received the same tax treatment as any other ordinary and necessary business expense, much the same as employee wages, rent, utilities, and office supplies,” Reps. Eliot Engel (D-N.Y.) and Kevin Yoder (R-Kansas) wrote to Speaker of the House John Boehner (R-Ohio) and Minority Leader Nancy Pelosi (D-Calif.). And now is not the time to change it, the lawmakers said.
In his 1,000-page tax reform package, Rep. David Camp (R-Mich.) proposed cutting the current 100 percent advertising tax deduction for businesses to 50 percent in the first year, with the remaining half amortized over a 10-year period.
The proposal drew the ire of the ad industry, which called the suggestion counterproductive to the stated goal of stimulating the economy. Now legislators have spoken up as well.
Reps. Engel and Yoder authored the letter and reached out to fellow lawmakers for support by asking them to sign on. Eighty-five members of Congress agreed, including Reps. Darrell Issa (R-Calif.), Bobby L. Rush (D-Ill.), and Nita M. Lowey (D-N.Y.).
While the letter acknowledged the need to “streamline the corporate tax code” and “eliminate loopholes and special benefits while lowering the overall tax rate,” cutting the ad tax deduction doesn’t make sense, the lawmakers said.
“Changes that will make advertising more expensive cannot be justified as a matter of tax or economic policy,” the legislators wrote. “Such changes would be severely detrimental to local advertisers, broadcasters, print media, online service providers, national media companies, news-gathering organizations, and other businesses that rely on advertising as their primary source of income. Imposing this cost on advertising would threaten the ability of these businesses to continue to support jobs and offer the high-quality news, information, and entertainment on which our constituents rely.”
Advertising supported 21.7 million jobs and generated $5.8 trillion in sales in the United States in 2013, according to a study by economic consulting firm HIS Global Insight that they cited in support. The study also noted that every dollar of advertising spent produced $22 of economic activity.
“Fixing our country’s tax code is a challenge that we welcome,” the lawmakers wrote. “As this Congress delves deeper into these issues over the coming weeks and months, we ask that any changes contemplated are meaningful and based in sound economic principles.”
To read the letter, click here.
Why it matters: The letter demonstrates a significant legislative concern that the advertising tax deduction should be modified, a proposal strongly opposed by the advertising industry. The Association of National Advertisers reiterated its objection to the legislation in a statement praising the letter. “We believe this letter by a broad bipartisan group of representatives demonstrates their clear understanding of the value of advertising to each and every congressional district across the United States,” the group wrote, as well as “shows that these members believe that changing the tax treatment of advertising expenses would cause undue economic harm to their constituents and the nation as a whole.”