e-Cigarette Advertising and Commercial Free Speech

In the words of former baseball player and philosopher Yogi Berra, “It’s like déjà vu all over again.” California Senator Barbara Boxer (D) has called upon the Federal Trade Commission (FTC) to expedite its study of the e-cigarette industry examining whether their advertising is encouraging children and youth to take up vaping.

Years of experience with other disfavored products leads us to expect that – no matter the results of the study – someone in Congress will likely call for bans or restrictions on e-cigarette advertising. While they will claim to be trying to protect youth, the actual limitations will likely be much broader and ban much advertising aimed at adult and legal consumers. Continue Reading →

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. Continue Reading →

Is Prescription Drug Advertising Really Harmful?

In response to a recent article.

On October 21, many Americans celebrated “Back to the Future Day,” commemorating the day that film’s main character, Marty McFly (played by recent Advertising Hall of Fame inductee Michael J. Fox) arrived in the future.  Unfortunately the doctors of the American Medical Association appear to have misread the memo (could it have been the handwriting?) and recently voted to go back to the past by calling for an end to all prescription drug advertising.

In this case, the doctors have made the wrong prescription.  Far from being harmful, AAF believes that pharmaceutical advertising has provided a great benefit to consumers and public health.  By raising awareness of products available to treat many medical conditions, from lung cancer to COPD to, yes, erectile dysfunction, pharmaceutical advertising has resulted in countless patients making appointments with their doctors to learn more.  That can only be a good thing. Continue Reading →

Proposed Tax Reform Released

House Ways and Means Committee Chairman Dave Camp, R-Mich., has finally released his public discussion draft for tax reform and the advertising industry is targeted for new revenues.

Under advertising provisions of the proposal “a taxpayer must capitalize and amortize 50 percent of its specified advertising expenses over a 10-year period, beginning with the midpoint of the tax year in which the expenses are paid or incurred.  The remaining 50 percent of a taxpayer’s specified advertising expenses may  continue to be deducted in the year paid or incurred (as under present law).”  The proposal provides an exemption from the capitalization requirements for taxpayers with advertising expenses of less than $1 million in a taxable year.

This proposal, if enacted, would have a devastating impact on the advertising and media businesses as well as the economy as a whole.  AAF will continue to educate lawmakers as to the value of keeping advertising as a fully deductible business expense in the current year, and urge them to oppose any changes to that status.  We urge all AAF members to contact their Representatives and tell them to oppose this provision of the tax reform plan.

Tax reform, and threats to advertising deductibility, will be a major topic of discussion at AAF’s Advocacy and Action: Advertising Day on the Hill on March 11 and 12.  One of the featured speakers will be Rep. Mike Kelly, R-Penn., who sits on the Ways and Means Committee and will talk about the prospects for the tax reform package.

If you have not yet done so, I urge you to register today for Advocacy and Action: Advertising Day on the Hill.  A hotel room block is available one block from the conference venue.

This is your opportunity to learn about tax reform and other issues confronting the advertising industry – and then tell your elected representatives where you stand.

Senate Bill Limits Ad Deductibility

Senator Max Baucus, D-Mont., Chairman of the Senate Finance Committee released draft tax reform legislation today that takes direct aim at advertising (section 23, page 104).  The bill would only allow 50% of advertising expenses to be deducted in the current year, with the remaining 50% amortized over 5 years.

It is critically important that the advertising industry speak loudly and clearly to Senators and oppose any limitation on the full tax deductibility of advertising.  Please contact your Senators today and ask them to oppose any change to the tax treatment of advertising. Continue Reading →

Ad Tax Deductibility Proposal Worse Than We Thought

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.