HANGING IN THE BALANCE: COMING WEEKS ARE CRUCIAL TO PRESERVING AD DEDUCTABILITY

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The fate of advertising deductibility could be determined in the next 100 days, as the Clinton administration and the Republican-controlled Congress try to come up with the money for a middle-class tax cut.

The industry dodged one bullet last week when President Clinton didn't mention changes in advertising's tax status in his State of the Union speech. And advertising and media executives were crossing their fingers the issue also won't pop up in the budget message due out this week.

Though at least one highly placed administration official said the Clinton budget makes no mention of changing the deductibility of advertising, members of the Advertising Tax Coalition were taking no chances.

"We are obviously pleased that it wasn't included in the State of the Union, but we are concerned about [President Clinton's] reference to [eliminating] `indirect subsidies,' " said Jim Davidson, Washington representative for the coalition that includes 11 major marketing and media associations.

The group's main concern is that the need to provide a promised middle-class tax cut could prompt the administration or Congress to look at reducing deductibility.

John Sturm, senior VP-public policy for the Newspaper Association of America, said his organization is keeping up the phone calls and pressure.

"While I was happy that he didn't get specific with regard to ... deductibility, on this issue I don't think you are ever totally out of the woods. It's the kind of issue that can pop up on a moment's notice... There is reason to believe that if it was there once, it isn't there any more."

Coalition members began an emergency lobbying campaign after a source who talked to President Clinton told the Magazine Publishers Association that the president was debating using the speech to endorse Labor Secretary Robert Reich's concept of limiting "corporate welfare." But in those talks, the president didn't specifically mention deductibility.

In several speeches last year, Mr. Reich said corporate downsizing has broken the bond between corporations and their workers. He suggested that some "corporate welfare" tax breaks-given corporations with the idea that they provide benefits to workers-should be reined in.

And the Democratic Leadership Council's Progressive Policy Institute has suggested cutting media advertising's deductibility from 100% to 80%. President Clinton was a co-founder of the council.

Alarmed by the signs of threats to deductibility, the Advertising Tax Coalition asked members to call the White House and Treasury Department. Coalition members include the American Advertising Federation, American Association of Advertising Agencies, Association of National Advertisers, the Direct Marketing Association, the Grocery Manufacturers of America, National Association of Broadcasters, Newspaper Association of America, the Point of Purchase Advertising Institute and the Yellow Pages Publishers Association.

The lobbyists said the biggest fear was that any mention of deductibility would put the issue in play and several noted that the new Republican Congress may not help. In the past the two most serious threats came from Republican presidents, they said.

"To fully fund the middle-class tax cut and not touch Medicare, it increases the odds we are on the table," said Dan Jaffe, ANA exec VP. He also warned that even no mention of ad deductibility in the budget may not be assuring.

"I think that the next 100 days are going to be some of the most complicated negotiations. There is a tremendous amount of money on the table, a balanced budget proposal, an increase in the Defense Department budget."

Some coalition members said the quick lobbying effort is already paying some long-term dividends as lawmakers now realize a change in advertising deductibility would be difficult to pass.

"This alert which caused the industry to aggressively express its viewpoint helped to convince the Clinton administration not to propose it at all," said C. Manley Molpus, GMA president-CEO, who said he believed write-offs won't be mentioned in the budget.

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