Credible sources within the House Ways and Means Committee have recently confirmed that not only does limiting the deduction for advertising costs remain on the table for tax reform, but that the proposal could be even worse than we feared. According to our information the plan under consideration would require 50% of all advertising costs to be amortized over 10 years, and 50% deducted in the first year of the amortization schedule.
It is very important that we contact members of Congress and express strong opposition to any attempt to limit the full current year deduction for advertising expenses. If your Representative does not sit on Ways and Means, encourage him or her to weigh in with Committee members and House leadership and urge them to drop the advertising proposal.
Any tax on advertising would be devastating not just to the advertising industry, but to the national economy as well. It would cost the nation millions of jobs and hundreds of millions of dollars in lost economic activity. This is exactly the wrong thing to do as the economy struggles to recover. The stimulus generated by advertising brings jobs and sales to every state and to every congressional district. More detailed talking points are listed below.
Members of Congress can be contacted though the U.S. House of Representatives website. Just enter your zip code in the upper right hand corner to find your Representative and a link to his or her webpage.
Please report back to Clark Rector, EVP, Government Affairs for the AAF with any response you receive and do not hesitate to let him know if you have any comments or questions. Thank you for your assistance with this vital matter.
Talking points for communications to Members of U.S. Congress:
- Preserve the current standard business deduction for the cost of advertising
- The House Ways and Means Committee has developed draft legislation that would impose a tax on advertising. Today businesses may deduct 100% of the cost of their advertising. The proposal would allow only 50% in the year the ad runs and require a business to spread the remaining amount over 10 years. IHS Global Insight estimates this could reduce sales in the U.S. by $446 billion and place 1.7 million U.S. jobs at risk.
- The Tax Code for 100 years has permitted businesses to deduct the full cost of their advertising, just as it permits the deduction of other ordinary business costs like salaries, rent, utilities and office supplies.
- Advertising expenditures generate sales activity in the U.S. economy amounting to $5.8 trillion. That is 20 percent of the total national economic output. It also helps support 20 million jobs or 15% of all jobs in the country.
- Nobel prize-winning economists who have looked at the advertising deduction have concluded that nothing in the economic literature justifies a change in tax policy.
- It makes no economic or common sense to make businesses pay more for advertising thereby causing a decline in ad spending and the sales advertising generates.