Taxing times

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Advertising taxes are bad economic policy and, ultimately, bad politics, too. Yet this idea resurfaces every time the U.S. economy stalls and state tax collections weaken. This time it's in Tennessee; tomorrow it will be lawmakers in some other state. Advertising groups are right to strongly oppose these measures wherever they emerge.

The states most likely to consider imposing advertising taxes are those where state leaders have failed to enact the sort of modern tax structure needed to finance government. By that we mean a state income tax. Tennessee currently lacks such a revenue source. So did Florida when, in 1987, its legislators enacted an unworkable ad tax that had to be repealed less than a year later.

To some state officials, the absence of a state income tax is something to boast about. In reality, however, it forces state governments to finance government programs through other types of taxes that are less fair and more regressive (such as steep sales taxes on basic goods) or special taxes that single out one area or another of business with adverse impact on the local economy. Nowhere is that more true than with ad taxes.

Advertising's job is to stimulate economic activity, which helps preserve and create jobs. The ad industry-backed Advertising Tax Coalition in Washington now has economic models that demonstrate the impact ad spending has on economic activity.

This tax battle is plainly a long-term struggle for the ad industry, one that comes and goes with the economic cycle. When pressed to raise new funds, some elected officials will always find advertising, with its large flow of dollars, a ripe target. Honed in previous tax fights, the case against ad taxes is, if anything, stronger today. These ad tax proposals can be defeated, but only when the case against them is effectively made by a determined and alert industry.

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