CAPITOL HILL TAX NONSENSE

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Defeat in the u.s. senate of tobacco legislation leaves behind many issues, but one that transcends tobacco marketing is the renewed attack on the deductibility of advertising costs as an "ordinary and necessary business expense."

Some Republicans and Democrats seem fascinated by the dangerous notion that deductions provided for ad costs are a "subsidy" granted by a generous government. From this comes the idea that Congress "subsidizes" tobacco advertising just as it subsidized tobacco farmers.

The Senate, before the tobacco bill collapsed last week, offered a new wrinkle to this discussion. It came very close to agreeing that any violation of Food & Drug Administration tobacco ad rules would be punishable by losing the ability to deduct an entire year's advertising costs.

This tax deduction talk invites more and more trouble as members of Congress decide this or that industry no longer deserves an advertising "subsidy." Or that the cost of ads on TV programs with too much sex or violence, for example, don't deserve tax "privileges." And it flatly ignores the vital role advertising plays in fueling economic growth -- not to mention the constitutional problems involved when the tax law is used with the intent of restricting protected commercial speech.

Until that day when Congress replaces our overcomplicated tax code with something better, advertising without question is an ordinary and necessary business expense -- no matter what the product -- and deserves the same tax treatment as every other cost of doing business. And that's worth fighting for.

Who wins?

We don't fault the newspaper industry for defending its turf, but the abrupt demise of the U.S. Postal Service's Auto Friday guaranteed day-of-delivery ad mail service gives us pause. While newspapers plainly want to keep a firm hold on auto-dealer advertising, are marketers well-served when Congress intervenes to deny them possibly useful alternatives?

Relations between the postal service and newspaper publishers are complicated, of course. They are ornery giants sharing a too-small bed. The postal service elbows newspapers whenever it tries to make bulk ad mail more attractive. Publishers complain about having to compete with a "government monopoly." Members of Congress, for whom the local newspaper publisher is an important constituent, usually lend a sympathetic ear, and postal managers usually get the message.

That's plainly what happened here. Explaining Auto Friday's fate, new Postmaster General William J. Henderson cited "concerns from members of Congress and the newspaper industry." We're realists; as long as the not-for-profit postal service has its monopoly on letter mail, it's not just another marketplace player. It can't square off for business the same way that, say, TV and newspapers battle for auto dealer ad dollars. So newspaper publishers will shoot first and ask questions later as long as the USPS pursues more ad business.

But isn't there some way for marketers, fighting to keep advertising costs in check, to get the benefits that come from innovations the postal service comes up with? Postmaster General Henderson knows the rancor that exists here, yet he proclaims he is convinced there are "natural, positive synergies that the postal service and the newspaper industry can bring to our customers by working together."

That's a statement marketers, newspaper publishers and members of Congress should follow up on. If marketers can't get the benefits of all-out competition between the postal service and newspapers, they should at least demand the fruits that come from cooperation.

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