In a final vote today, The Washington, D.C. City Council nixed, as expected, a proposed 3 percent tax on advertising services and the sale of “personal information.”
The tax, just one part of the city’s proposed 2021 Budget and Financial plan, was introduced to help combat Washington, D.C.’s growing budget deficit, which has been compounded by the pandemic. Last week, the D.C. Council chairman had announced he would be abandoning the tax, which the Washington Post reported has left city officials scrambling to figure out what then to cut from the budget to make up for an estimated $18 million loss in projected revenue. The proposed tax was expected to generate $18.4 million in revenue for the 2021 fiscal year.
Since its introduction earlier this month, though, the tax was met with pushback by local D.C. area agencies and organizations like the Association of National Advertisers (ANA) and the American Association of Advertising Agencies (4A’s), which argue it would have had adverse effects on local small businesses.
“The 4A's is very grateful that the D.C. City Council listened to the hundreds of D.C.-based companies who expressed their opposition,” the 4A's said in a statement. “No state or city is going to be able to tax their way to prosperity in the midst of our current pandemic and economic crisis, and attempting to do so will be counterproductive at best. Advertising grows business, and concurrently, grows the sales tax base for states and cities. Before immediately jumping to new taxes, states and cities should first consider how they can help their small businesses thrive, as small businesses will be the ones to lead the way to economic recovery.”
The ANA also released a statement on the vote, commending "the Council of the District of Columbia for eliminating the use of an onerous proposed advertising and data tax from its 2021 budget." ANA Group executive VP Dan Jaffe added in the statement that the "proposed tax would have caused irreparable harm."
Still, Alison Pepper, executive VP of government relations for the 4A’s, tells Ad Age that she doesn't expect this fight to be over, as she anticipates other states facing steep budget shortfalls to introduce similar tax bills.
“I absolutely expect other states to follow suit,” Pepper says, noting how she is particularly concerned with the introduction of the personal information tax, which can be “confusing” to advertisers.