A New Political Environment in Washington
Contributed by Dan Jaffe
The election of Donald J. Trump as 45th President of the United States — a confounding event to pollsters and pundits and a political bombshell still reverberating through Washington, D.C. — could continue to cast aftershocks that may affect the marketing and advertising industries.
With Republicans now in control of both the White House and the Congress, for the first time since 2006, there is likely to be an end to the political gridlock of the last several Congressional sessions. And the conventional wisdom is that GOP control will usher in a strong deregulatory pro-business environment.
That is certainly the best bet, but any attempts to stereotype the likely approach of the new administration to business across the board is premature in light of President-elect Trump's actions, e.g.: his response to Carrier Corp.'s plans to move some of their activity to Mexico and to Boeing's charges for presidential jets, his promise to bring prescription drug prices down during his presidency, and other direct forceful interventions opposing business initiatives of specific companies.
So as we look into a still cloudy crystal ball, what does this new political environment likely mean for the marketing community? We have our eye on several issues: tax deductibility of advertising expenses, net neutrality and ISP privacy, effects of repealing and replacing Obamacare on advertising, and how a new Supreme Court justice may view First Amendment protections for advertising.
Major tax reform efforts are almost certain to surface this year. Donald Trump talked about it during his campaign, and Speaker of the House Paul Ryan, House Ways and Means Committee Chairman Kevin Brady (R-TX), and Senate Finance Committee Chairman Orrin Hatch (R-UT) are strong proponents. This is one area where both parties agree that action is necessary.
But there are multiple corporate tax reform plans out there, including a sweeping proposal to supplant the existing corporate income tax with a broad consumption tax approach. There is no clear consensus yet on how to proceed.
Marketers and agencies, however, should be aware that proposals were floated recently in both the House and the Senate to end the immediate write-off of all advertising expenses and to require that 50 percent of those expenses be amortized over five or 10 years. These proposals would impose an increased tax burden of $169 billion to $200 billion on the ad community.
The conventional wisdom is that Republican control of both the White House and the Congress will usher in a strong deregulatory pro-business environment
What the ANA Is Doing
The ANA is working proactively with its members and industry allies to assure that the full immediate deductibility of all advertising costs continues in the new administration.
As part of The Advertising Coalition (TAC), the ANA helped fund an important study which quantifies the economic value of advertising in every state and congressional district in the country. Economic research firm IHS Economics & Country Risk found in a 2015 study commissioned by the ANA that advertising accounted for $5.8 trillion in U.S. economic activity and supported more than 20 million jobs, which represents 14 percent of all U.S. employment.
The ANA also holds grassroots meetings with key members of Congress to explain why the full deductibility of advertising costs is critical for our economy and all businesses. Having a broad range of representatives from ANA member companies join these meetings would be beneficial.
Healthcare, Privacy, and Other Issues
One of the top early priorities for the Trump administration is to repeal and replace the Affordable Care Act, also known as Obamacare. This will once again place a spotlight on the advertising of products that might impact health costs.
Another area where action is almost certain is the privacy arena. The WikiLeaks revelations, the scandal about Hillary Clinton's emails, and the leak of Donald Trump's partial 1995 tax returns during the campaign have drastically increased the focus on privacy, data, and cybersecurity issues. Legislation in these areas has been introduced in Congress for several years, but nothing moved. These efforts are likely to be substantially reenergized and launched again.
The Federal Communications Commission (FCC) stepped into this arena last year with a live hand grenade in the form of a sweeping privacy proposal for Internet Service Providers (ISPs). The final rule was adopted on October 27 on a 3-2 party-line vote. In an unprecedented decision, the FCC treated all browser and app-use data as "sensitive" and required that consumers opt-in for the collection and use of this data. This was a radical departure from the approach of the Federal Trade Commission (FTC) and the Digital Advertising Alliance (DAA) industry privacy self-regulatory program, which allows for an opt-out for all non-sensitive areas.
Fortunately for marketers, President-elect Trump has spoken out against the FCC's net neutrality rules, which are the foundation for the Commission's privacy regime, and he is expected to make major changes at the FCC. The commission will soon have a 2-1 Republican majority and Trump will be able to name a new chairperson, either by moving up one of the current Republicans or by naming a new member as chair. Republican control of the Congress and the FCC makes it highly likely that the ISP privacy rules will be rolled back. The privacy rule could also be blocked through action by the Congress or litigation.
The ANA, along with a number of other industry groups, has called for reconsideration of this order and believes that the FCC will do so.
One of the immediate decisions facing President Trump is who he will appoint to the U.S. Supreme Court to replace Justice Antonin Scalia, who died last year. This is a key issue for marketers because many of the cases supporting strong First Amendment protection for advertising were 5-4 decisions with Justice Scalia in the majority.
The bottom line is that while there is much speculation on what marketers can expect from a new Trump administration, no one can really know what will happen. Trump has been known to disagree with the Republican establishment on numerous issues, but agree with them on others, so Republican control of Congress in itself is no guarantee that total unity among the GOP will prevail. And of course the Democrats will do what they can to prevent passage of policies they disagree with and promote their agenda. The simple fact is that time will tell, but 2017 is shaping up to be an interesting year in our nation's capital.
A Call to Action
Right now, there are more questions than answers about how the Trump administration and the new Congress will treat the marketing and advertising industries. To succeed in this new political environment, the ANA needs your help. Please encourage the government relations professionals in your company to get in touch with the ANA's Washington, D.C., office, and let us know what you think about the major issues facing our industry. You can call 202.296.1883 or email firstname.lastname@example.org.
Dan Jaffe is the group executive vice president of government relations at the ANA.
Photo credit: Christopher Halloran/Shutterstock.com
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