Potential Changes in Deductibility of Advertising Expenses within Tax Reform Legislation Would Only Serve to Stifle Economic Activity

Proposal Would Create Disincentives for Advertising Spending
and Trigger Significant Job Losses and Reductions in Economic Output

November 21, 2013 Washington, DC — Senator Max Baucus (D-MT), Chairman of the U.S. Senate Finance Committee, today released his discussion draft of tax reform legislation that includes a provision that will, if enacted, severely impact the economy and lead to significant job loss. This provision would allow advertisers to deduct only 50 percent of all advertising expenses in the first year and amortize the remaining 50 percent over the next five years. Advertising currently is treated as a fully tax deductible ordinary and necessary business expense. Following is a statement by Bob Liodice, President and CEO of the Association of National Advertisers, which represents more than 550 companies with more than 10,000 brands.

“Senator Baucus’ draft proposal seriously undermines the deduction for advertising expenses and would have a profound impact on the advertising industry and the economy more broadly. Changes to the way advertising deductions currently are treated would greatly affect sales and employment across all levels and sectors. This is essentially a major new tax liability which would increase the cost of advertising and cause a substantial disincentive for companies to spend additional advertising dollars.”

“Advertising is a vast driver of sales and jobs and is an essential component of the U.S. economy. It serves to stimulate new economic activity that triggers a cascade of sales and fosters job creation throughout the U.S. marketplace. In 2012, advertising accounted for $5.6 trillion of U.S. output and supported 21.1 million of the 136.2 million U.S. jobs.”*

“While the advertising industry supports the need for tax reform, we strongly urge reconsideration of this harmful provision that will have severe repercussions on the U.S. economy.”

* The data cited above comes from research conducted by IHS Global Insight, Inc. and based on a model developed by Nobel Laureate in Economics Lawrence Klein. This study assesses advertising's economic impact across 52 industries, plus government, in every state and Washington, D.C., as well as in each of the 435 U.S. Congressional Districts.

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About the ANA
Founded in 1910, the ANA (Association of National Advertisers) leads the marketing community by providing its members with insights, collaboration, and advocacy. The ANA includes more than 550 companies with 10,000 brands that collectively spend over $250 billion in marketing communications and advertising. The ANA strives to communicate marketing best practices, lead industry initiatives, influence industry practices, manage industry affairs, and advance, promote, and protect all advertisers and marketers.