Facing a threat from Capitol Hill that would hurt the ability of businesses to deduct advertising expenses, the Association of National Advertisers released a study that says the move would badly hurt the U.S. economy.
The study, conducted by IHS Global Insight, said that by 2017 advertising will directly and indirectly foster $6.5 trillion in U.S. economic activity and help support 22.1 million U.S. jobs. It also found that each dollar spent on advertising expenses generates nearly $22 of economic output.
The study is a response to two proposals aimed at cutting the overall corporate tax rate. Senate Finance Committee Chairman Max Baucus, D-Mont., and House Ways and Means Committee Chairman David Camp, R-Mich., have each proposed allowing businesses to deduct only 50 percent of their advertising expenses in a tax year and require the balance to be amortized over five years (Senate plan) or 10 years (House plan.)
Advertising is now treated as an ordinary business expense, fully deductible in the year incurred.
The ANA said the Senate plan would put 1.7 million jobs and $456 billion in sales at risk.
"This would undermine sales and innovation across each business sector," said ANA President Bob Liodice. "This is the most wide-ranging and destructive threat the advertising industry has ever seen."
The ANA, which was joined by The Advertising Coalition in releasing the study, has for months argued that proposals to alter the deductibility of advertising expenses would harm the U.S. economy. But, in a new effort to pressure lawmakers, the IHS Global Insight study breaks down the tax proposals' impact on every state and each of the nation's 435 congressional districts. For instance, the study said advertising is responsible for 673,062 or 16.6%, of all jobs in Michigan and 1.4 million or 16.4% of all Jobs in New York.
But whether Congress will act on a tax bill this year is in doubt.
Mr. Baucus had planned on leaving office at the end of this year. But now that he is President Obama's choice to become the ambassador to China, he will likely leave before then.
This is also an election year, which makes it less likely lawmakers will want to tackle a controversial issue like taxes. And next year, Mr. Camp will have to relinquish his role as chairman of the House Ways and Means Committee due to House GOP rules that place term limits on such positions.
ANA lobbyist Dan Jaffe said there may be time for Mr. Baucus to push forward his tax proposal before he leaves for China. Mr. Jaffe also said Mr. Camp's impending term-limiting "may create an incentive for him to push harder" this year.
"I think it's very shortsighted to believe nothing will happen," Mr. Jaffe said.
Jim Davidson, executive director of The Advertising Coalition, said that even if the 113th Congress fails to address tax reform, the threat to the advertising industry will remain in future Congresses.
"It will just keep coming and coming and coming," he said.