No 190: Florida’s ad tax statute

Campaign UK - - NEWS -

His­tory has a warn­ing for any politi­cians – ei­ther na­tional or lo­cal – think­ing of slap­ping a tax on ad­ver­tis­ing. The US state of Florida in­tro­duced one. It was an un­mit­i­gated dis­as­ter.

In 1987, Florida’s po­lit­i­cal lead­ers were in a fix. The state was des­per­ate to fi­nance the in­fra­struc­ture needed to keep pace with its ex­plo­sive growth and to fund ser­vices such as roads, bridges and schools.

But, un­like most other US states,

Florida had no in­come tax and was con­sti­tu­tion­ally pro­hib­ited from adopt­ing one.

Leg­is­la­tors thought they’d found the an­swer to their cash short­fall by in­tro­duc­ing a 5% tax on all kinds of ser­vices from those pro­vided by lawyers and ac­coun­tants to mu­sic teach­ers.

Most con­tro­ver­sial of all was the move by Bob Martinez (pic­tured), Florida’s gov­er­nor, to ex­tend it to all ad­ver­tis­ing in the state. This in­cluded TV, ra­dio, news­pa­pers and mag­a­zines.

The bill’s pas­sage into law pro­voked up­roar and out­rage. The As­so­ci­a­tion of Na­tional Ad­ver­tis­ers, fear­ful that other states would fol­low Florida’s lead, pledged to mount “the largest lob­by­ing ef­fort in our his­tory” against the tax.

Proc­ter & Gam­ble, Kraft and Kel­logg were among a num­ber of big ad­ver­tis­ers that stopped run­ning com­mer­cials in Florida, hit­ting rev­enue for TV sta­tions.

As mar­ket­ing com­pa­nies moved to neigh­bour­ing states to avoid the ex­tra costs, op­po­nents of the tax can­celled con­fer­ences and con­ven­tions in Florida, one of the US’S most tourist-sen­si­tive economies.

Cru­cially, the tax caused ad­min­is­tra­tive melt­down. Af­ter pro­cess­ing 12 mil­lion ad trans­ac­tions, Florida’s Depart­ment of Rev­enue found that the ad­min­is­tra­tive costs ex­ceeded tax col­lec­tions.

Six months af­ter its in­tro­duc­tion, the tax was re­pealed by Florida’s leg­is­la­ture, but not be­fore an es­ti­mated 14,000 jobs were lost as a re­sult of it. Since then, 40 US states have con­sid­ered an ad tax. All have re­jected it.

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