The Advertising Coalition (TAC) is comprised of national trade associations whose members are advertisers, advertising agencies, broadcast companies, cable operators and program networks, and newspaper and magazine publishers. These companies and associations share a common objective — they oppose proposals in Congress or from the Executive branch of government to limit or restrict advertising content or volume, or to limit the ability of businesses to deduct the cost of advertising as an ordinary and necessary business expense.
The Congress and the Administration are about to address the greatest budget challenge the nation has faced in decades. In order to reduce annual federal deficits, they must find more than $1 trillion in revenue in addition to reducing spending in federal programs. For nearly 100 years business have been able to deduct their ordinary and necessary costs – including the cost of advertising. Now this long-accepted deduction may be at risk. Congress is debating proposals that would disallow as a deduction a substantial percentage of advertising costs. This would represent a direct tax on advertising, and the media and advertising industries are working to prevent its enactment.
The debate over limits on the deduction of advertising costs began during consideration of the 1986 Tax Reform Act when the Treasury Department sent to the Senate a proposal to disallow as a deduction 20 percent of all advertising costs. Treasury estimated that the disallowance would raise $21 billion over five years. Since that time, the Congressional Joint Committee on Taxation listed this proposal in a pamphlet published about revenue options, and the Congressional Budget Office for several years discussed this option in its annual report on deficit reduction strategies. The Progressive Policy Institute listed the current deduction for advertising costs as an example of corporate welfare that should be restrained, and a Chairman of the House Budget Committee proposed to apply a $10 billion tax on advertising in an early draft of the fiscal 1996 Omnibus Budget Reconciliation Act.
Recent proposals in Congress would have imposed bans and other restrictions on direct-to-consumer (DTC) advertising of prescription medications, and denied the deduction for advertising of alcohol beverages and tobacco products. Concern over the impact of advertising on prescription drug use has prompted influential Members of Congress to explore various financial disincentives to discourage this type or advertising. Six separate proposals that would have adversely affected advertising were voted on by the U.S. Senate in the last decade. All six were defeated, and other restrictions on DTC advertising were stopped in the House and Senate. The scope of attacks is a constant reminder of the importance of vigilance in the protection of commercial speech.
TAC successfully has opposed efforts to limit the content or tax treatment of advertising by adhering to the wisdom of former House Speaker Tip O’Neill, who said, “All politics is local.” TAC has challenged the policy, economic, and tax premises asserted to restrict or tax advertising in person. The Coalition brings media and advertising executives together with members of key Senate and House committees, frequently in their home states and congressional districts.
Business advertising is essential to the health and continued recovery of our nation’s economy. A tax on advertising would cost the U.S economy hundreds of billions of dollars in lost sales and more than one million jobs. These massive effects on the economy result from the multiplier effect that advertising spending creates, which generates far more revenue than the cost involved in preparing and communicating the advertising.
To illustrate the importance of advertising in every state and Congressional district, TAC asked Dr. Lawrence R. Klein, who was awarded the Nobel Prize in economics in 1980, and IHS Global Insight, the world recognized economic consulting firm, to measure the impact advertising has on economic activity and job creation. Their research demonstrates that economic activity stimulated by advertising generates 21.1 million of the 136.2 million jobs in the United States.