The Advertising Coalition
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. Proposals are being debated 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.
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. This results from the multiplier effect that advertising spending has by generating far more revenues in sales than the cost of preparing and communicating the advertising. The Advertising Coalition (TAC) is comprised of media companies and national trade associations whose members are advertisers, advertising agencies, advertising clubs, broadcast networks, cable operators and program networks, and newspaper and magazine publishers. These companies and associations share a common objective—to protect advertising from initiatives by the federal government to tax or restrict the content of advertising.
The Coalition has worked to demonstrate to the Congress, the Executive Branch and to federal regulatory agencies the critical importance of advertising to the U.S. economy through two landmark studies. The Coalition asked Dr. Lawrence R. Klein, Benjamin Franklin Professor Emeritus of Economics and Finance at the University of Pennsylvania, and IHS Global Insight, the world recognized economic consulting firm, to measure the impact advertising has on economic activity and job creation. Their research illustrates that economic activity stimulated by advertising generates nearly 20 million of the 133 million jobs in the United States and accounts for $5.8 trillion of the $29.6 trillion in U.S. economic output. Dr. Klein was awarded the Nobel Prize for Economic Science in 1980 for his work in developing the widely used macroeconomic model of the U.S. economy on which the advertising study was based.
In another landmark study prepared for The Advertising Coalition, “An Economic Analysis of the Tax Treatment of Advertising Expenditures,” two Nobel Laureates in economics, Dr. Kenneth Arrow and the late Dr. George Stigler, demonstrate the importance of advertising to product and price competition and to the entry of new businesses into the marketplace.
Advertising is a powerful tool for competition in the U.S. economy. It provides valuable information about products and services in an efficient and cost-effective manner. In this way advertising helps the economy to function smoothly. The Advertising Coalition is committed to expanding the understanding of the role of advertising in our economy for policymakers at all levels of government.
For more information, visit www.theadvertisingcoalition.com.