Senate reopens ad deductibility issue

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The seemingly dead issue of advertising deductibility is being resuscitated in Congress.

A proposal to drop tobacco advertising's deductible status is among ideas the Senate Finance Committee will examine this week as it looks for ways to reform the Internal Revenue Service. Such a move is being viewed as a way to offset losses from making the IRS more consumer-friendly.

The Finance Committee hopes a bill will be ready for a committee vote by the end of next week. Unless Senate rules are waived, Chairman William Roth (R., Del.) and the committee must offset losses from the proposed reforms with new revenue.


"We are looking at a lot of different things, and we have not ruled anything out," said Ginny Flynn, committee press secretary. "There are a lot of people running around who are sure they are being targeted as the source of revenue."

Ad and media groups last week said deductibility is on the list and mounted an emergency campaign to get it off. The groups warned committee members they risked raising major constitutional issues in choosing between favored and unfavored speech, while warning marketers limits imposed on tobacco deductibility could inspire attempts to regulate other industries.

"It could serve as precedent for Congress to pick various industries . . . cherry-picking where congressional committees say they don't like the advertising," said Wally Snyder, president-CEO of the American Advertising Federation. "What is really going on is they are trying to raise money. We do not feel it is appropriate to take away legitimate business tax deductions, and second, we see the constitutional questions."


Dan Jaffe, exec VP of the Association of National Advertisers, said he has been told removal of an ad deduction is not high on the committee's list.

Nevertheless, "We are taking it seriously," he added. "If anyone thinks that once you take away a deduction it will stop with tobacco, they are clearly wrong."

The Finance Committee's list marked the second time in a week proposals to end tobacco advertising's deductibility had surfaced. Earlier, Sens. Jack Reed (D., R.I.) and Barbara Boxer (D., Calif.) said they would seek to force tobacco marketers to accept "voluntary" ad restrictions by removing ad deductibility for any company that didn't accept the curbs.


Also last week, the Senate Budget Committee, headed by Pete Domenici (R., N.M.), drafted a budget plan that could kill or drastically reduce proposals for a $500 million annual anti-smoking ad campaign.

Copyright March 1998, Crain Communications Inc.

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