LATEST AD TAX PLAN MEETS SPEEDY DEATH

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An ad tax option to help finance healthcare reform appears to be dead on arrival.

Advertising's fully deductible status was jeopardized Aug. 19 in a list of financing options offered by a bipartisan coalition of Senate moderates, led by Sens. John Breaux (D., La.) and John Chafee (R., R.I.).

The options for financing the coalition's healthcare reform/deficit reduction package included allowing 80% of advertising costs to be deducted immediately. The remaining 20% would be amortized over an unspecified period, believed by ad industry groups to be 10 years, to raise $35 billion to $40 billion.

However, by the middle of last week, following fax alerts to members of major ad industry associations, spokesmen for both senators said deductibility wasn't among the amendments being proposed for the reform plan offered by Senate Majority Leader George Mitchell (D., Maine).

"It's dead," said Jeff Perlman, senior VP-government relations for the American Advertising Federation, which issued a fax alert to members to call their senators Aug. 22 and 23 but called off the effort by the afternoon of Aug. 23. "But dead is a relative word ... We'll continue to lobby against the possibility" of ad taxes.

The Association of National Advertisers, however, was not ready to call off the dogs, especially since it wasn't known which coalition members were behind the option.

"We have to take this threat seriously," said Dan Jaffe, exec VP of the ANA, which also issued a fax alert to members.

"Just the fact [the Congress] raised [the possibility] is highly troubling," he said. "We have to make sure we're heard. It's important to scream very loud to make sure they know what areas to stay away from."

Though the groups oppose any ad tax, this plan was especially troubling because it affected all advertising. In recent years, ad taxes have been suggested on specific products believed to harm people's health, such as tobacco.

The ANA urged its members to let Congress know that healthcare reform should not be financed on the backs of the advertising community. The group also said the 80/20 ad tax option contradicts all the Clinton administration and Congress policy statements about healthcare reform being self-financed through insurance reforms and cost savings.

"Healthcare costs a lot of money and as long as [the ad tax] remains a revenue option, [the tax] remains a danger," said John Kamp, senior VP, American Association of Advertising Agencies.

The Four A's urged members to write friendly letters to Congress reminding them that "advertising drives the economy, creates jobs and stabilizes the tax base. That keeps all government programs going," Mr. Kamp said.

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