The Association of National Advertisers and the Advertising Coalition are pulling out all the stops to derail what they assert are ad tax efforts in Congress that would severely harm the U.S. economy at a time when it is still rebounding from the last recession.
The trade groups issued a new study today that concludes that the ad tax proposals would curtail U.S. business investment and potentially put 1.7 million U.S. jobs at risk. The effects would be felt nationwide across all business sectors, per the study.
Currently, advertising expenses are fully deductible in the year the expenses occur. One proposed tax measure, from Senator Max Baucus of Montana would allow companies to deduct only 50% of their ad spending in the first year and require them to amortize the remaining 50% over the next five years. The ANA said that a similar proposal from Congressman Dave Camp of Michigan would require a ten-year amortization period for half of a company’s tax expenditures.
On a conference call Tuesday with reporters to discuss the study Dan Jaffe, the ANA’s top lobbyist, said marketers would lose at least 40% of their annual tax deduction for advertising if the proposed changes are adopted. And some $456 billion in U.S. economic growth could be lost, he said.
“We support tax reform that is even-handed and fair,” said ANA CEO Bob Liodice. But the ad tax efforts from Baucus and Camp, he said, are “unfair and arbitrary.”
The study was conducted by IHS Global Insight. It found that for each dollar spent on advertising that’s expensed generates nearly $22 of economic output that would not have otherwise existed. Also, every $1 million spent on annual advertising that is deducted supports 81 American jobs. By 2017, “advertising will directly and indirectly foster $6.5 trillion in U.S. economic activity (sales) and help support 22.1 million U.S. jobs,” the study concluded.
“Advertising’s ripple effect can be felt across every sector of the U.S. economy, in every state, Congressional district, and on the federal level, demonstrating advertising’s importance to the nation’s economy” said Doug Handler, chief U.S. economist of IHS Global Insight.
“This new data affirms that advertising is a central driver of economic growth,” Liodice said. “By building brand awareness and helping companies communicate the benefits of their products and services, advertising triggers economic activity and serves as a major catalyst for job creation.” More on the study can be found here.