WISCONSIN OPENS DOOR TO AD TAX

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Wisconsin's search for about $1 billion to help pay for its schools may lead to advertising.

In what some believe could be the gravest ad-tax threat since Florida in 1986, Gov. Tommy Thompson and a special blue-ribbon commission late this year will consider extending the state's 5% sales tax to previously untaxed goods and services, including advertising.

Already the state's Legislative Fiscal Bureau has calculated that a 5% tax on advertising would raise more than $73 million a year.

The quest for money began earlier this year after the Legislature voted to reduce property taxes and boost the state's portion of elementary and secondary education financing to about two-thirds from less than half.

The commission, including the governor and legislators, was created to come up with ways to pay the bill. The panel is expected to convene late this year or early next, and will make recommendations by October 1995.

State Revenue Secretary Mark Bugher acknowledged that taxing advertising and other services "will be part of the debate" but was also well aware of Florida's 1986 ad tax, repealed a year later.

"We weren't born yesterday," Mr. Bugher said. "We certainly watched what happened in Florida carefully. It's the Legislature that has the view to expand the sales tax base."

Mr. Bugher also acknowledged the problem of trying to implement an ad tax in a state that borders business-friendly Illinois.

"The ease with which services can be moved outside borders because of a tax makes it a challenge to tax advertising," he said. "It would be easy to move the business an hour down the road."

LeRoy Yorganson, executive director of the Wisconsin Newspaper Association, said Gov. Thompson might be forced into a tax dilemma.

"He's usually indicated that he doesn't want to injure economic growth so he may be inclined to tax less inhibiting services, but we can't be sure," Mr. Yorganson said. "We're hoping to be ready in the fall to demonstrate to the governor and Legislature the effects of an ad tax here. Not only would it reduce advertising ... but it could hurt some newspapers badly. It would force cutbacks at some dailies and probably kill off about half a dozen weeklies."

"I think we're going to have an exact repeat of what happened in Florida in the 1980s," he said, "with all the confusion and advertiser boycotts and putting at a competitive disadvantage our ad industry with neighboring states and cities, like Minneapolis and Chicago."

Members of the American Association of Advertising Agencies and Wisconsin Association of Broadcasters are also monitoring the situation.

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