Take Nothing for Granted

September 27, 2017

Today the “Big Six” released their proposal for tax reform, entitled: “Unified Framework for Fixing Our Broken Tax Code.” It calls for reducing the top corporate tax rate to 20 percent, preserving the research and development deduction, and allowing companies to immediately expense the cost of new investments in depreciable assets other than structures for at least five years. We were very pleased to see that there was no proposal to limit advertising deductions covered in the framework.

We commend the “Big Six” for their efforts over the last several months to develop this proposal. On September 8th, ANA and other industry groups met with senior officials at the Treasury Department. We support corporate tax reform, but we are very concerned that the current tax deduction for advertising costs could still be at serious risk in this debate.

The document does not describe how these changes would be paid for but does include some very significant language: “numerous other special exclusions and deductions will be repealed or restricted.” In addition, the document states: “While the framework envisions repeal of other business credits, the committees may decide to retain some other business credits to the extent budgetary limitations allow.”   

We have consistently been told in our meetings with key members of the tax-writing committees that “everything is on the table” to pay for corporate tax rate deductions.

We strongly support the lowering of corporate tax rates to guarantee U.S. competitiveness. However, it would be inappropriate and certainly counterproductive to impose increased tax burdens on the effort to sell in order to fund the tax reform effort. Advertising is extremely valuable to the U.S. economy, both as an economic driver of sales and as a consumer resource. It is part of the lifeblood of the economy, not a special interest exemption to be used to make up for shortfalls elsewhere.  
ANA and The Advertising Coalition (TAC), of which ANA was a founding member, recently released a study which provides a comprehensive assessment of the total economic impact of advertising expenditures across the country. The study, conducted by IHS Economics and Country Risk, Global Insight, Inc., is based on an econometric model of the U.S. economy that was originally created by the late Dr. Lawrence R. Klein, a Nobel Laureate in Economics.

The study found the following:

  • 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
  • Every $1 million spent annually on advertising supports 67 American jobs
  • Advertising supports 20 million, or 14 percent, of the jobs in the U.S.

The study found that the impact of advertising is surprisingly consistent across the country regardless of the location or population of a state. For example, advertising generates 19 percent of economic impact in both New York and Arkansas. In fact, there is no congressional district or state in this country where advertising does not play a highly beneficial and substantial role.

As the tax reform debate proceeds, we will continue our efforts to preserve the full deductibility of all advertising costs.

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