Advertising Taxes: New IHS Economics and Country Risk Study
The Advertising Coalition (TAC)
Since the last major overhaul of the Federal Tax Code in 1986, there have been numerous proposals to end the tax deduction for advertising expenses, either partially or totally. ANA and The Advertising Coalition (TAC) have been successful in defeating every one of these proposals.
IHS Economics & Country Risk Study Demonstrates the Importance of Advertising to the U.S. Economy
ANA and The Advertising Coalition (TAC) have released a landmark new study conducted by IHS Global Insight, Inc. that demonstrates the importance of advertising as a driving force in the United States economy.
Among the findings:
- Advertising contributed $3.4 trillion to the U.S. GDP in 2014, comprising 19 percent of the nation’s total economic output.
- Each dollar spent on advertising expenses generates nearly $19 of economic output that would not have otherwise existed.
- In 2014, advertising accounted for $5.8 trillion in overall consumer sales and supported, totaling 16 percent of all sales activity in the U.S.
- Advertising supported 20 million, or 14 percent, of the 142 million jobs in the U.S. in 2014.
- Every $1 million spent on annual advertising expenses supports 67 American jobs.
- Every direct advertising job supported another 34 jobs across all industries.
|In June 2015, 88 Members of Congress signed a letter to maintain the
treatment of advertising as an ordinary and necessary business expense.
Read the letter here
Tax Plans That Include Amortization Proposals Being Considered By Congress
In 2014, former Chairman of the House Ways & Means Committee Dave Camp (R-MI) and former Chairman of the Senate Finance Committee Max Baucus (D-MT) released draft tax reform proposals that would require the amortization of certain advertising expenses. This marks a drastic departure from the historical treatment of advertising as an ordinary and necessary business expense, which has allowed it to be virtually one hundred percent deductible in the year in which the expense is made. Under the plans, 50 percent of certain ad expenses would be deductible currently, and the other 50 percent would be amortized over either a five or ten year period.
While ANA supports tax reform and the lowering of corporate tax rates, we do not believe it would be appropriate to use advertising to fund this reform effort. Estimates predict that these proposals will cost advertisers $169 billion over 10 years. Advertising has never been treated as a special interest exemption before, and it must not be treated as one now.