Big media makes late push to kill advertising levy in tax Bill

The last thing big media companies want is a change in the tax code that would make advertising more expensive for clients like McDonald’s and Wal-Mart.

The industry’s lobbyists are trying to avoid that scenario as Republicans prepare to unveil tax-reform legislation.

Supporting the lobbying efforts are 15 US senators, including five Republicans, who sent a letter this week to Congressional leaders on both sides of the aisle opposing any measure that would “tax advertising” as part of an overhaul of the tax code. The Republican support is noteworthy because there are only 52 GOP members of the Senate, so the party can only afford a few defections.

“For the life of the tax code, advertising has been treated the same as all other regularly occurring business expenses,” said the Oct. 30 letter signed by senators including Republicans Rand Paul, James Inhofe and John Boozman. “Any measure that would tax advertising – and therefore make it more expensive – cannot be justified.”

The proposal being considered would allow marketers like Procter & Gamble Co to deduct only half of advertising costs immediately, according to people familiar with the situation. The rest of the expense would spread out over five years, said the people, who asked not to be named because the talks are private. The idea has been floated routinely over the past 30 years, including in 2013 and 2014, and the media and advertising industries have either killed it or the legislation went nowhere.

“Where it hits extraordinarily hard is the media, which is already struggling without any additional burdens,” said Dan Jaffe, who is executive vice president for the Association of National Advertisers, including consumer product and media companies, and has been lobbying on the issue. “This could be a very heavy straw on the camel’s back.”

Wider Group

The letter from the senators follows one in May from 124 members of the House, including both Republicans and Democrats, that laid out similar arguments.

House Republicans are planning to unveil tax legislation on Wednesday, with the terms still very fluid. Like any industry group, media and advertising companies argue they are integral to the economy and job creation. Retailers used this tact well to head off the border adjustment provision that House Speaker Paul Ryan championed. The letter from the senators says that advertising supports 20 million US jobs and contributes to 19% of gross domestic product.

“We ask that you continue to support local businesses and recognise the importance of advertising on jobs and the economy,” the October letter said. — Bloomberg