Advertising tax looms in wake of calls for balanced budget p. 29

By: Debra Gersh Hernandez Republican senator says if cash crunch comes up, it's a possibility

BALANCING THE FEDERAL budget will mean finding revenue from various sources, and one area to watch is the tax deductibility of advertising expenditures.
Advertising groups worked diligently to stop this issue from being used as an example of corporate welfare by the president during his recent State of the Union Address, explained Dick O'Connor, chairman and CEO of Lintas Campbell-Ewald and chairman of the American Advertising Federation, during the AAF's annual government affairs conference in Washington.
Sen. Charles Grassley (R-Iowa), a member of the Senate Finance Committee, said real tax issues will be addressed once the Republicans' Contract with America is finished.
"We do have to deal with the deficit," he said, "but we have to deal with spending cuts first.
"If we get down to a crunch for money, reconsidering the advertising tax is likely," Grassley said. He added, however, "I don't think it's a good idea. It is a legitimate business expense. Either it's a legitimate deduction" and businesses are allowed to deduct it completely, or they should not allow it at all, rather than some partial deduction.
"If history is any teacher, I'm sure we'll see these issues come up again," Grassley said of ad taxes, as well as alcohol and tobacco advertising restrictions.
Michigan Democratic Rep. Sander Levin said the House Ways & Means Committee, of which he is a member, was gearing up to tackle tax issues.
Levin identified three issues raised by the Republican contract proposals for tax reduction: the inescapable relationship of tax reduction to the deficit; the relationship between tax policy/tax reduction and growth; and the interface between tax cuts and the overall distribution of income.
While he warned the AAF to "keep your eye on the expensing issue," Levin advised not to lose any sleep over it, but "watch the impact of [other] tax issues."
"I think, to put it as dramatically as I can, a $7-trillion deficit five years from now will not be good for advertising," Levin said.
Diversity in the advertising business was the issue of concern to Rep. Cardiss Collins (D-Ill.), who chided ad people for recognizing the value of African Americans as consumers and endorsers but not as employees.
Collins said that while she has seen a diversity of faces in ads ? which she hopes will continue to grow ? she was alarmed by a study showing the absence of people of color working for advertising agencies.
"I find it difficult to believe that an industry able to convince minorities to plunk down billions of dollars to purchase goods cannot persuade them to join the industry," she said. "You can no longer hide your dismal employment record behind the smoke screen of internships and training programs."
In addition, she was dismayed by the exclusion of black-owned agencies from general contract bidding.
Rep. Michael Oxley (R-Ohio) said he was particularly pleased by last year's reauthorization of the Federal Trade Commission, and noted that one nice thing about being in the majority this year is the fact that "the media and our colleagues take what we say a lot more seriously."
When asked about advertising content regulations for alcohol and tobacco from the Food and Drug Administration, Oxley said, "The short answer is, they are not going to be very successful. Our goal is less regulation, not more. Regulatory agencies have far outstripped their authority."
The telecommunications' "regulatory environment we have now will not accommodate technology as fast as it's coming," said Sen. Conrad Burns (R-Mont.), a self-professed fan of the advertising business.
Advertising is going to "pay the way" for new technology, he added, predicting that the real telco fight will be in the long distance arena.
"If I were in Congress, I would pass it," Federal Communications Commission (FCC) commissioner James Quello said of telco legislation. "Allow local telephone and cable, and long distance and local [phone companies] into each other's businesses. I think it will pass."
Quello also commented on TV and movie violence, which he said he did not think was "responsible for all the violence in society, but it is a contributing factor."
While noting that he was not telling them what to do, Quello noted that broadcasters are still licensed by the FCC to serve the public interest, and urged movie and TV studios to pull back on the violence and stop trying to outdo one another.
Sen. Richard Bryan (D-Nev.) appreciated the accolades for the FTC reauthorization, which he called a "torturous process."
Bryan commented that he was troubled by the fact that "the word compromise . . . has taken on a rather distorted meaning."
He said he found it "extraordinary," that to compromise has come to mean surrender or abdication, that one stands for nothing, although he later conceded that certain issues are "deal breakers."
"People who are the most effective are the ones who work together and meld different points of view and effect compromise," Bryan said, calling the U.S. Constitution the "product of the greatest compromise in American history . . . .
"One troubling thing I see is a new group of people with an unyielding ideology," he continued. "Some collision courses are unavoidable. With this ideological purity, compromise is like a surrender of principal."
Regulatory reform is one area in which a middle ground is needed between those who believe there should be strict regulation and others who call for a moratorium on regulation.
However, if regulation "is brought to a halt at the federal level, you will see action at other levels. You'll still be confronted by what the states are going to do," Bryan said.


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