Local ad and media groups, along with the Florida Association of Broadcasters, have hired a political consultant and are turning over their own media time in July for a consumer ad effort warning the public not to vote for an upcoming tax proposal. The battle is reminiscent of one 21 years ago when the Florida Legislature approved an ad tax, only to reverse course six months later.
Property-tax revolt brewing
The immediate target is a referendum vote this November on a constitutional amendment to cut state property taxes by 25%. Called Amendment 5, the proposal was added to the ballot by Florida's Taxation and Budget Reform Commission and heavily pushed by one of its members, former Florida Senate President John McKay, a real-estate developer. Since property taxes fund the state's schools, the proposal directs the Legislature to replace the $11 billion lost.
Business groups, advertisers and media companies say the proposal's wording effectively mandates that Florida's Legislature eliminate sales-tax exemptions on service industries -- among them advertising and media -- to replace the revenue. The proposal, for example, prevents the Legislature from raising the current 6% state sales tax on products by more than 1 percentage point.
"When you get reality, you are forcing the Legislature to act," said D. Patrick Roberts, president-CEO of the Florida Association of Broadcasters, who warned that an ad tax could be devastating to the state. In 1987, when the Florida Legislature passed such a tax, conventions were moved, ad schedules in the state were canceled and some smaller companies fled Florida before the Legislature reversed course.
Overall, broadcasters saw $93 million in ad sales canceled, and that didn't count sales nixed in newspapers, outdoor and cable TV. "It's now 20 years later. You are talking about $250 million at least," estimated Mr. Roberts.
Countering the critics
Mr. McKay, however, rejects suggestions that the amendment's passage would lead to new service taxes and said there is absolutely no chance the state Legislature would pass an ad tax.
"There isn't a snowball's chance in hell, because of the effective job the ad community did [beating it down] in 1987," he said. "The Legislature wouldn't consider it for a second, and anyone who tells you otherwise is naïve or dishonest."
He suggested that the property-tax cut would boost home sales and in turn purchases of furniture and home appliances, raising additional sales-tax revenue and easing some of the need for new taxes. "What money is needed could be raised from eliminating some exemptions and exclusions and possible sales taxes on internet purchases," he said.
"The hypocrisy is that the groups opposing this are groups that represent big business. This helps the average Florida homeowner. It is not designed to help big business," contended Mr. McKay.
But David Daniel, VP-government affairs for the Florida Chamber of Commerce, said despite what Mr. McKay maintains, the possibility of a service tax is definitely there. "To assume the state can take a hit and not feel it is very convenient," he said. "Once you take the majority sales tax exemption off the table [as a replacement], I think it's inevitable if not explicit." Mr. Daniel said besides the ad campaign, the Chamber of Commerce will file a lawsuit challenging the amendment's inclusion on the ballot.
Anne Grigsby, who as governor of the American Advertising Federation's Southeast division coordinates ad clubs in Florida Boca Raton and is herself a design-firm owner, said informational meetings have been taking place among broadcasters, newspaper publishers and business groups regarding the campaign, which calls itself the Victory Group.
"We have the beginning of a coalition between the Florida Association of Broadcasters [and] outdoor companies, and we are holding meetings about the state to get the word out," she said.
Ad campaign in the works
Mr. Roberts said the ad campaign being readied will get extensive media time from broadcasters and media companies. One focus of the effort will be to suggest to the public that the switch would benefit part-year residents and developers while hurting year-round residents of the state.
In Washington, advertising groups said they feared the Florida action because it could give direction for other states hard-pressed by a toughening economy. Officials noted that states such as Texas and California have major holes in state budgets as tax revenues drop.
"As long as state legislatures need the money, advertising or service taxes are something they look at," said Jeff Perlman, exec VP of the American Advertising Federation.