Government Relations

Tax Reform: An Area Of Cooperation?

In the immediate aftermath of the election, Republican leaders and President Obama were pledging cooperation on a number of issues of mutual interest. One of the most prominent of these is tax reform.

As AAF members know, major corporate tax reform plans were introduced a year ago by the chairmen of the House and Senate tax writing committees. Both of those proposals would have dramatically reduced the corporate tax rate while simultaneously eliminating many tax deductions and preferences. In both plans, only 50% of advertising expenses could be deducted in the first year. The remaining amount would then be amortized over time – five years in the Senate version, 10 years in the House. The Joint Tax Committee estimates the House version would raise $169 billion over ten years.

The plans were bipartisan as the then-chairman of Senate Finance was Democrat Max Baucus of Montana and the chairman of House Ways and Means is Republican Dave Camp of Michigan. Senator Baucus left the Senate to become U.S. Ambassador to China and Representative Camp is retiring at the end of the Congressional session, so both Committees will have new leaders in the new session.

Senator Orrin Hatch, R-Utah, will chair the Senate Finance Committee. Representatives Kevin Brady, R-Texas and Paul Ryan, R-Wis., are expected to compete to be the new chair of Ways and Means.

Fortuitously, representatives of the Utah advertising industry, including AAF-Utah, recently met with Senator Hatch to discuss the importance of maintaining full current year deductibility of advertising expenses. Representative Ryan has talked about the need for tax reform to address both corporate and personal income taxes, so that may influence how the issue is addressed as well.

On a related note, The Center for American Progress, a liberal leaning public policy research and advocacy organization, has endorsed the amortization of a portion of advertising costs over a period of time. While not making a specific recommendation, the report specifically references Ways and Means Chairman Camp’s plan. The Center’s report does acknowledge that the influx of revenue would be short-term since businesses would still eventually be able to deduct the full 100% of their advertising expenses.

AAF will continue to work with our nationwide grassroots network to educate lawmakers on the importance of maintaining the full current year business tax deduction for advertising expenses.