Advertisers Wage Campaign Against Camp’s Tax Plan

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Chairman of the House Ways and Means Committee Dave Camp (L), R-Michigan, listens to testimony by Marilyn Tavenner, Administrator for Centers for Medicare & Medicaid Services, US Department of Health and Human Services as she speaks during a hearing with the House Ways and Means Committee in Washington, DC, October 29, 2013.
National Journal
Billy House
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Billy House
Feb. 24, 2014, 5 p.m.

Ad­vert­ising lob­by­ing groups are mo­bil­iz­ing like mad men against a key piece of the tax-code re­form pack­age that House Ways and Means Com­mit­tee Chair­man Dave Camp could un­veil as early as Wed­nes­day.

“WE NEED YOUR HELP,” warns an alert sent out by the As­so­ci­ation of Na­tion­al Ad­vert­isers to its 574 mem­ber com­pan­ies last week. The group is bra­cing for battle against what it ex­pects to be a call to change the stand­ard tax de­duc­tion that busi­nesses use for ad­vert­ising ex­penses.

“[Camp] said it is time to take on spe­cial in­terests. But ad­vert­ising is not a spe­cial in­terest, and has nev­er been con­sidered a spe­cial in­terest” in the tax code, said Dan Jaffe, the Wash­ing­ton-based ex­ec­ut­ive vice pres­id­ent of the ANA.

Oth­er na­tion­al ad­vert­ising groups — such as the Ad­vert­ising Co­ali­tion and the Amer­ic­an As­so­ci­ation of Ad­vert­ising Agen­cies — are also push­ing against such a plan.

Ad­vert­ising is now treated as an or­din­ary, fully de­duct­ible busi­ness ex­pense in the year it is in­curred. The trade groups and their mem­bers fear that Camp is about to pro­pose that busi­nesses may de­duct only 50 per­cent of their ad­vert­ising ex­penses in a tax year — and re­quire that the bal­ance be amort­ized over some num­ber of years.

The latest word, they say, is that he may seek to amort­ize the de­duc­tion over a five-year peri­od. That is short­er than a pre­vi­ously-floated 10-year frame but sim­il­ar to what former Sen­ate Fin­ance Com­mit­tee Chair­man Max Baucus pro­posed in a dis­cus­sion draft in Novem­ber.

Op­pon­ents say any such change would severely dam­age agen­cies and oth­er busi­nesses that rely on ad­vert­ising spend­ing.

Ex­actly what Camp will pro­pose could still be un­der re­vi­sion, and a com­mit­tee spokes­wo­man de­clined to provide fi­nal de­tails on Monday — in­clud­ing wheth­er he would call for lower­ing the cor­por­ate tax rate from 35 per­cent to 25 per­cent. Demo­crats on the com­mit­tee said he was sug­gest­ing that change to them last sum­mer, along with lower­ing the rate for top in­di­vidu­al earners from 39.6 per­cent to 25 per­cent. The talk now is that the chair­man may be re­con­sid­er­ing that ori­gin­al plan, and that his top rate may not go be­low 30 per­cent.

But Demo­crats ar­gue that without new rev­en­ues, any such re­duc­tion wouldn’t be paid for, and so would add to the na­tion’s debt.

Camp, who faces a term lim­it at the end of 2014 as Ways and Means chair­man, will have an up­hill battle in get­ting House GOP lead­ers to back ac­tion on his pro­pos­als dur­ing what re­mains of this midterm elec­tion year. But ad­vert­isers say they don’t want to al­low any mo­mentum to build for some fu­ture ef­fort in the House and Sen­ate that is aimed at the de­duct­ib­il­ity of ad­vert­ising ex­penses.

As part of its ef­forts, the ANA has already re­leased a study with the Ad­vert­ising Co­ali­tion that says lim­it­ing the abil­ity of busi­nesses to de­duct the cost of ad­vert­ising in this way could threaten 1.7 mil­lion jobs and $456 bil­lion in sales over the next five years.

And to put a per­son­al touch on that case for law­makers, the IHS Glob­al In­sight study breaks down what would be the im­pact of the tax pro­pos­al in each of the na­tion’s 435 con­gres­sion­al dis­tricts.

In its alert to mem­ber busi­nesses, the ANA has asked them to “please con­tact mem­bers of the House Ways and Means Com­mit­tee that your com­pany has close re­la­tion­ships with and stress to them the im­port­ance of main­tain­ing the full de­duct­ib­il­ity of ad­vert­ising ex­pendit­ures.” The ANA has also put to­geth­er a list of talk­ing points and noted a web­site that deals with “the ad tax threat.”

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