Ad Tax: Taxing What Generates Revenue

Some bad ideas never seem to die.  As reliable as Washington, DC cherry blossoms in the spring (but not nearly as welcome) are state lawmakers speculating about taxing advertising.  So far this year alone ad taxes have been discussed in Illinois, Louisiana, Oklahoma and West Virginia.  They have even been talked about in Tucson, Arizona.  At this point, none are close to being put in place, thanks at least in part to the vocal opposition of AAF members.

It is understandable that when states need revenue many lawmakers look for new taxes.  What is less understandable is why so many look to tax an activity that generates economic activity; that generates sales; and that helps generate tax revenue.  That is what advertising does.

In West Virginia advertising generates 21% of the state’s economic activity.  Advertising helps produce 15% of all jobs in Illinois.  Every $1 million spent on advertising in Oklahoma supports 73 jobs in the state.  That sounds like something that should be encouraged – not discouraged through taxation.

Some lawmakers learned that lesson the hard way.  The last state to tax advertising was Florida – way back in 1987.  As predicted by the industry, advertising dollars left the state.  While the tax was in effect national advertising purchases increased by 3% – except in Florida where they decreased by 12%.  One Orlando television station alone lost nearly a quarter million dollars in revenue.  It was such a big mistake the tax was repealed after only six months.

And yet, nearly every year since then at least one state, and usually more, has considered an ad tax.  Over the years ad tax proposals have appeared in well over half of the states.

To this point wiser heads have prevailed and all of the potential ad taxes have been rejected.  AAF grassroots members have done an outstanding job over the years communicating the lessons of Florida and the devastating impact an ad tax would have on the state’s economy, industry and consumers to their own lawmakers.

However, we know from long experience that as long states want or need more money to spend, someone is likely to suggest taxing advertising.  And when they do, AAF and our thousands of grassroots members nationwide will continue to educate lawmakers and shout our message that an ad tax is a bad tax.

About the Author

Clark Rector, EVP of Government Affairs, AAF

Clark RectorAs executive vice president-government affairs, Clark Rector oversees and directs the lobbying efforts of the American Advertising Federation’s grassroots network of 40,000 advertising professionals in some 200 local advertising clubs and federations nationwide. Together, they have defeated ad tax proposals and other threats to advertising in Congress, nearly every state and numerous cities and counties. In his role as chief public policy advocate for the Federation, Rector meets with lawmakers and regulators to educate them about advertising and represent the industry’s position on important legislative and regulatory matters.  He has testified for the AAF before the U.S. Senate and Federal Trade Commission, as well as numerous state legislatures and city governments.

Prior to joining the AAF in 1988, Rector spent two years on Capitol Hill as a legislative assistant for Congressman Tom Luken of Ohio. He also spent three years working in local television in Austin, Texas. Rector is a graduate of the University of Texas and received a Master of Arts in Communication Studies from the University of Iowa.