Deleting Advertising Expenditures Deduction Harmful
Ringrose, Carol, THE JOURNAL RECORD
Proponents of the proposal estimate that it would raise between $37 billion and $38 billion over three years that could be applied to the budget deficit.
The proponents operate under the assumption that advertising capital is an asset like machines, said O'Toole, but advertising is a constant and recurring expense.
Only the brand and brand franchise endure, he said. Advertising is like the gasoline that keeps the car running.
If the deduction for advertising expenses is eliminated, it will be like a 5 percent tax on advertising, said O'Toole. Then companies probably will reduce the amount of advertising to compensate.
If you believe that advertising produces sales, then reducing advertising will result in lower sales, said O'Toole. Some statistics state that each $1 of advertising results in $30 in sales.
"If you multiply $37 billion by $30, it will do a lot of damage," he said.
The advertising industry is also fighting proposals to limit advertising for tobacco products.
U.S. Rep. Mike Synar, D-Okla., proposed legislation to ban all tobacco advertising during the 99th and 100th sessions of Congress. The bills did not emerge from sub-committees, O'Toole said.
"Many of the representatives don't smoke, but were uneasy about the constitutional problem of banning advertising for any product that government might hold in disfavor at the moment," said O'Toole.
There is no direct correlation between advertising for tobacco products and their use, said O'Toole. Advertising has continued at high levels, while the number of smokers is declining. …