Trump, GOP Tax Plan Spares Ad Industry...for Now

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President Trump participates in a tax reform kickoff event at the Loren Cook Company last month in Springfield, Missouri.
President Trump participates in a tax reform kickoff event at the Loren Cook Company last month in Springfield, Missouri. Credit: Official White House Photo by Joyce N. Boghosian

Ad industry leaders are breathing a sigh of relief after learning that Donald Trump and Republican lawmakers are not targeting the industry as part of a sweeping tax proposal unveiled Wednesday morning.

The Association of National Advertisers and other industry groups have for years raised alarms that Congress would reduce the deductibility of advertising expenses, resulting in a new tax burden for any company that spends money on advertising. But the GOP plan rolled out today does not touch ad expenses, said Dan Jaffe, who heads the ANA's government relations office.

"We are getting growing support for our views," he says. "But when you cut the corporate tax code down as much as they are doing, the search for money is going to be intense. And so anybody who takes their eye of this until the very last minute … is being very incautious."

The plan by the Trump administration and GOP lawmakers reduces the corporate tax rate to 20% from 35%. For individuals, it lowers the current seven tax brackets from to three from seven—12%, 25% and 35%— while doubling the standard deduction. In an effort to simplify the tax code, the plan eliminates some itemized deductions, but keeps deductions for mortgage interest and charitable contributions. The tax code has long treated advertising expenses as an ordinary and necessary business expense, not a special write-off.

The ANA remains concerned about generic language in the new plan stating that "numerous other special exclusions and deductions will be repealed or restricted." Jaffe in a blog post today said "we have consistently been told in our meetings with key members of the tax-writing committees that everything is on the table to pay for corporate tax rate deductions."

But the group takes solace in getting commitments from 124 House members to protect ad expenses, which is up from 88 in 2016, he said in an interview.

The ANA's tax anxiety, which it loudly proclaims on a regular basis, might seem like unnecessary trade group fear-mongering. However, there have been times when the industry's tax status has been in some peril. For instance, in 2014 a plan authored by then-House Ways and Means Committee Chairman Dave Camp would have allowed advertisers to deduct only 50 percent of advertising expenses in the first year and amortize the remaining 50 percent over the next 10 years.

And this year's tax debate carries some unpredictability, to be sure, because Trump is desperate to cut a deal on a signature campaign issue after failing on other priorities, like repealing Obamacare.

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