ANA Calls on New York Delegation to Oppose Ad Tax Proposal that could Significantly Impact the State’s Economy

September 29, 2014

In case you missed it, today Politico Morning Tax and New York Capital Playbook included the letter that ANA sent to all members of the New York Delegation marking the start of Advertising Week in New York. The letter urges opposition to draft tax reform proposals in Congress that would drastically cut the advertising deduction.

As thousands of marketing and communications professionals come together for Advertising Week to discuss best practices and the future of advertising, it is also a perfect time to recognize the important role that advertising plays in the state and city of New York. It is fitting that Advertising Week is held in New York as the city is the center of the advertising industry we know today. From the start of the industry until the present day, advertising continues to be one of the major driving forces in the New York economy, as it creates new jobs and generates sales.

According to a recent study commissioned by The Advertising Coalition and the ANA and conducted by IHS Global Insight, advertising accounts for $510.9 billion of economic output in New York – that is 19.7 percent of the $2.5 trillion total economic output in the state. These impressive figures unfortunately could be in serious jeopardy because of a proposed major change to the U.S. Tax Code that would severely impact the bottom lines of New York companies and place New York jobs and sales at risk.

New York businesses will face a significant financial burden as a result of the proposals in Congress. Companies that spend $1 million or more on advertising in a year would be allowed to deduct only 50 percent of their advertising costs. The remaining 50 percent would have to be amortized over ten years in the House draft and five years in the Senate draft.

Since 1913, when the federal income tax was first enacted, 100 percent of advertising expenditures have been deductible in the year in which they are expended — treated no differently than any other ordinary and necessary business expense, like salaries, rent, utilities and office supplies. A study by Nobel Laureates in Economics, George Stigler and Kenneth Arrow, found that there was no economic or tax basis for amortizing advertising.

True tax reform in this country should not focus on penalizing companies that advertise; rather, tax reform should focus on closing loopholes and special interest write-offs that limit the competitiveness of all businesses, whether in New York or nationwide.

ANA called on members of the New York Delegation to actively oppose any tax on advertising whether through a delayed deduction of these costs or other means because of its potential to seriously impact New York’s businesses’ bottom lines and jeopardize the state’s economy, jobs and sales. While New York clearly is one of the largest centers of advertising in this country, our economic analysis has demonstrated that every congressional district and state in the U.S. is profoundly positively affected by advertising. IHS Global Insight’s research demonstrates that for the U.S. as a whole, advertising generated $5.8 trillion in economic activity and 21.7 million jobs in 2012.

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