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ANA, Advertising Coalition: ‘Ad Tax Would Severely Harm Economy’

22 Jan, 2014 By: Doug McPherson

NEW YORK – The Association of National Advertisers (ANA) and the Advertising Coalition say changes to the deductibility of ad expenses that Congress is considering would severely harm the U.S. economy.

The two groups released a study that concludes that the ad tax proposals would curtail U.S. business investment and potentially cost 1.7 million U.S. jobs, and that the effects would be felt nationwide across all business sectors.

Today, advertising expenses are fully deductible in the year the expenses occur. But Sen. Max Baucus (D-MT) is proposing a tax measure that would allow companies to deduct only 50 percent of their ad spending in the first year and require them to amortize the remaining 50 percent over the next five years. Rep. Dave Camp (R-MI) is suggesting a similar proposal that would require a 10-year amortization period for half of a company’s tax expenditures.

On a conference call last week with reporters to discuss the study, Dan Jaffe, the ANA’s top lobbyist, said marketers would lose at least 40 percent of their annual tax deduction for advertising if the proposed changes go through and $456 billion in U.S. economic growth could be lost.

ANA CEO Bob Liodice, said, “We support tax reform that is even-handed and fair.” But, he added, the tax efforts from Baucus and Camp are “unfair and arbitrary.”

“This new data affirms that advertising is a central driver of economic growth,” Liodice said. “By building brand awareness and helping companies communicate the benefits of their products and services, advertising triggers economic activity and serves as a major catalyst for job creation.”

The study, done by IHS Global Insight, found that for each dollar spent on advertising that’s expensed generates nearly $22 of economic output that would not have otherwise existed. Also, every $1 million spent on annual advertising that is deducted supports 81 American jobs.

The study concluded that by 2017, “advertising will directly and indirectly foster $6.5 trillion in U.S. economic activity (sales) and help support 22.1 million U.S. jobs.”

“Advertising’s ripple effect can be felt across every sector of the U.S. economy – in every state, congressional district, and on the federal level – demonstrating advertising’s importance to the nation’s economy,” said Doug Handler, chief U.S. economist of IHS Global Insight.

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