TEXAS TAX PLAN DROPPED

Would Have Imposed Fees on Advertising Services

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WASHINGTON (AdAge.com) -- The Texas House of Representatives has effectively killed a state Senate plan that would have subjected advertisers to a sales tax of up to 10%.

Ad groups, however, remain concerned that the proposal could resurface in a special session of the Texas Legislature expected to begin later this year.

Keep the pressure up
"It would be a mistake not to keep the

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pressure up," said Dan Jaffe, executive vice president of the Association of National Advertisers. "This has only delayed the decision."

Linda Dove, senior vice president of the American Association of Advertising Agencies, said ad groups may be in better position in the special session because Texas Gov. Rick Perry will have more of a role in deciding what will take place. The governor has opposed the tax, which was part of a plan pushed by Lt. Gov. David Dewhurst designed to raise additional money for Texas schools.

The plan called for trading a cut in state property tax for a higher state sales tax and the elimination of many exemptions from state sales taxes including the advertising exemption. On May 9, just days after the Senate approved the plan 30-0, the House rejected consideration of the Senate proposal and declined to appoint a conference committee.

No details known
Although the plan, which also backed by State Sen. Florence Shapiro, taxed advertising, no details of how the ad tax would work have been disclosed. It wasn't clear whether the ad portion would have applied to media buys or only to advertising services, nor what kind of media buys would be covered.

The proposal comes as Texas and a number of other states look for new sources of revenue to boost or to keep existing services as the economy hurts revenues or revenue growth. An aide to Ms. Shapiro said the Texas plan didn't attempt to deal with lost revenues, and was aimed only at boosting education spending.

Ann Arnold, executive director of the Texas Association of Broadcasters, said she doesn't think the issue is over.

"The enormity of the school finance problems makes it a cause for concern," she said.

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