Ad Tax Threats Appear in Several States

February 22, 2017

After a quiet year in 2016, state ad tax advertising threats once again appear to be on the increase. While corporate tax reform is in the very early stages with Congress and the Trump administration, state governments across the country are hard at work on adopting their budgets for the new fiscal year which begins on July 1st. Several states are still struggling to recover from the recession and face budget shortfalls. Unfortunately, taxing advertising has been proposed or discussed in several of those states.      

West Virginia faces a $500 million budget shortfall for the 2017-2018 fiscal year which begins on July 1st. Governor Jim Justice (D) recently proposed a budget that would increase the state sales tax (currently 6 percent) by one-half percent and eliminate the current sales tax exemptions for professional services and advertising.  

Oklahoma also faces a budget shortfall and Governor Mary Fallin (R) released a budget proposal that calls for more than $800 million in new revenue through “sales tax modernization” by taxing more than 164 new services, including “Radio, TV, Publisher Representatives.” Governor Fallin had proposed taxing advertising last year but the legislature rejected that approach.  

Kentucky faces a serious funding shortfall in their state pension system. In his “State of the Commonwealth” speech, Governor Matt Blevin (R) said that he would be calling a special session later this spring to reform the tax code. He urged lawmakers to examine every aspect of the tax code and warned that there will be “sacred cows that are turned into hamburger.” Several commissions have examined tax reform in Kentucky in the last several years and have called for expanding the sales tax base to tax more services.

Finally, Illinois has entered the second year without a formal budget and continued gridlock between Governor Bruce Rauner (R) and the Democrats who control both houses of the General Assembly. While he has not specifically called for an advertising tax, the Governor has stated that he would accept a package with new revenues if it also contained several government reforms.      

We are working closely with our member companies, the broadcasters, publishers and other allied groups in all of these states to oppose any tax on advertising. For example, we helped provide funding for the coalition in Illinois, which has a website at: http://noadtaxillinois.com

Over the last 25 years, ANA has helped defeat over 120 ad tax proposals in more than 40 states. These successful efforts have saved the ad community potentially billions of dollars in additional tax burdens. Through The Advertising Coalition (TAC), we have produced the IHS Economics and Country Risk study, which demonstrates the benefits of advertising to the national economy and to each of the fifty states. The study demonstrates that advertising is one of the major engines of economic activity and jobs throughout the U.S. This report is a powerful tool in contacts with state lawmakers. Clearly, burdening the selling effort of advertising would be highly counterproductive.

State ad taxes are not a new idea, just a bad one.


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