Congress paints target on ad deductibility

February 4, 2016

WASHINGTON—Main Street commerce could be hit hard if congressional tax writers opt for the advertising tax as a way to fund lower corporate taxes for Wall Street companies. The Senate Finance and House Ways and Means Committees must find nearly $1 trillion in new revenues as they begin to tackle major tax reform legislation.

A key goal in tax reform is to reduce the corporate income tax rate. So, another tax source must be found. Eliminating a portion of the deductibility of advertising expenses is a juicy target, producing about $179 billion in new federal revenues.

The problem is that advertising is a major economic driver in the U.S.

A recent study by IHS Economics, produced at the request of The Advertising Coalition, reported in December 2015 that U.S. companies spent an estimated $297 billion on advertising in 2014. Advertising supported $5.8 trillion of U.S. economic output and 20 percent of the 142 million jobs in the U.S.

Why would Congress even consider tapping such a fruitful economic source? Because it needs the money to create incentives for Wall Street, according to National Newspaper Association President Chip Hutcheson, publisher of The Times-Leader, Princeton, KY.

“For us, it is clear that draining local business revenues by taking away ad deductibility is an attractive strategy for some. That is why we are seriously urging publishers to join NNA in Washington on March 17 to tell Capitol Hill that we cannot fund this corporate tax cut,” he said.

A formal “ad tax,” which would have eliminated half of the deductibility of the business expense and forced that half to be amortized over 5-10 years, appeared in the waning days of the last Congress. This year’s formal proposal has not yet been introduced, but the attraction of the large revenues that an ad tax could produce over the short term is evident.

“We cannot take our eyes off this ball for a second,” Hutcheson said. “We know that any form of this tax will hurt our newspapers, their advertisers and their local communities. But Congress wants revenue, and we are a target.”

NNA’s Community Newspaper Leadership Summit on March 17 will focus on the ad tax, as well as postal reform and the aggressive proposal last summer by the U.S. Department of Labor to make 10 million workers newly eligible for overtime. Hutcheson said the proposal would force many newsrooms to eliminate positions as editors and others have to move to hourly jobs.

“People ask me often why I ask them to invest in the travel to come to this summit,” Hutcheson said. “I tell them there are two reasons. First, your presence there creates an impact that a letter or a phone call does not do. It sends the signal that our industry is paying attention and cannot be ignored. Second, the relationships with the congressional staffs, who have the time and interest to get to know local businesses when the senator or representative may not, can be the critical resource for you when legislation starts to move.

“NNA has accomplished a lot over the years. We do it all with the participation of our members. Not a cent goes to political donations or Political Action Committees, like the ones most industries use. Our grassroots is everything.”

Information on the issues and registration is available at Publishers are also urged to ask their printers to attend the workshop on March 16 for printers that mail Newspapers. Detailed instructions on how to avoid service delays will be available there, as well as an intensive dialogue with senior U.S. Postal Service officials on the causes of service curtailments.

The Summit will conclude with a dinner at the National Press Club. Senate Majority Leader Mitch McConnell is the invited speaker.

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