The Biggest Threat to Our Business … Hovering and Heinous
In the world of fiscal policy – if there’s a public or private behavior that has a disagreeable effect, then government has a tool to move behavior to a desired effect: taxation.
If the world has too much global warming, then tax fossil fuels and carbon emissions.
If smoking causes cancer, then tax cigarettes.
If alcoholic consumption brings on social ills, then tax wine and spirits.
If the world is becoming more unequal, and the middle class is under threat, then tax wealth.
But if the world has too much economic activity … why would that not be only a good thing?
In the United States (and probably elsewhere), the trouble with taxation — unfortunately, moral judgments aside — is that it is used too often for another objective: simply feeding the government leviathan. Failure to curb public spending, excessive entitlements and inefficiencies result in public debt and harrowing deficits – and a need for government to raise revenue anywhere it can.
But what if raising those taxes works against an overwhelming public good — that of economic growth that spurs even more government revenue? What if jobs, sales, manufacturing, services, the business of business, were all under threat by such a move?
Shouldn’t such a tax proposal be rejected on first consideration? How could such a proposal ever be offered in the first place?
Say hello to today’s U.S. Congress. Right now, in key House and Senate committees that consider taxation, budget and appropriations, is an idea that would be nothing short of ruinous to advertising and marketing: the removal or reduction of tax deductibility for advertising expenses, or the amortization of those expenses over a long period of time, far beyond advertising’s more immediate and practical impact.
Just more than a century ago, the federal government enacted an advertising expense tax deduction – rightly understanding that advertising activity spurs economic growth. That in turn creates jobs, sales, tax revenue, and other beneficial effects that lead to a virtuous circle of positive effects. I congratulate our policymakers … of 1913. That decision literally helped create a golden era for advertising – which helped produce the world’s most successful economy ever known.
So let’s tax ourselves out of existence. I mean, really?
Formed in 1990, the Advertising Coalition is comprised of media companies and national media and advertising trade associations whose members are advertisers, advertising agencies, broadcast networks, cable operators and program networks, and newspaper and magazine publishers, according to its Web site. These companies and associations share a common objective – to protect advertising from federal government initiatives to tax or restrict the content of advertising. In 1995, there was a House proposal to use tax reform to tax advertising as an end to “corporate welfare,” in a bid to capture $25 billion in revenue. It eventually, wisely went nowhere.
Now it’s more serious. In 2013-2014, a proposal emerged in the House and Senate to impose a $169 billion tax on advertising – allowing advertisers to deduct only half their advertising costs when incurred, and spreading out the remainder over 10 years.
New Coalition-funded research, conducted independently by IHS Global Insight, shows what’s at stake: Economic activity stimulated by advertising generates 20 million of the 142 million jobs in the United States and accounts for $5.8 trillion or 16 percent of the country’s $36.7 trillion output.
Were that to go away, one can only imagine how our virtuous circle would become an unvirtuous downward spiral.
Unfortunately, the current Congress has not dismissed these ideas out of hand: that’s why it is time to get each and every Member of Congress on record now: oppose this heinous change to our tax code – and call it for what it is: a direct threat on the engine of our economy – advertising – and the commerce we create.
I am first in line as a fiscal conservative. Which leads me to say: let’s not cut the jugular of the U.S. economy in a blind aim to cut deficits!
My thanks to the American Advertising Federation for its recent ADMERICA 2015 Conference presentation on tax policy: Visit the Advertising Coalition Web site to learn more what you can do, as an individual or as a company, to get Congress to end such threatening shenanigans.