July 8, 2009

July 8, 2009

To: AAF Members
From: Clark Rector, Executive Vice President-Government Affairs
Re: Urgent. Advertising Deductibility – Action Needed Now

Eliminating the federal tax deduction for prescription drug advertising continues to be on the table as a revenue option for healthcare reform in both the House Ways and Means and Senate Finance Committees. Local AAF members across the country, and other industry representatives, have done an excellent job of making their voices heard. However, victory on this important issue is not assured.

We must reach members of the Ways and Means and Senate Finance Committees soon! They need to hear from as many advertising industry professionals as possible that any effort to eliminate the deductibility of advertising should be rejected. I urge you, your coworkers and members of your advertising federation to call or email lawmakers today. Please distribute this alert to other members of the advertising industry in your market.

Contact information for the appropriate staff for the House can be found here and the appropriate staff for the Senate can be found here.

Please do not hesitate to call if you have any comments or questions.

The proposal to deny deductibility of prescription drug advertising should be rejected because:

  • Advertising is critical to the economic recovery of our nation. It provides $6 trillion in sales and 21 million jobs. In these challenging economic times we cannot afford to make any form of advertising more expensive by taxing it.

  • The United States Supreme Court has said that even a tax can be unconstitutional if used the way it is being proposed – to tax speech about a product in order to make it more difficult and more costly to advertise. Because the tax makes this form of speech more expensive, it would violate the First Amendment because the suppression of this speech means consumers will receive less information.

  • The United States Senate three times has rejected amendments that would have denied the deduction for the cost of tobacco advertising – they rejected the amendments because they were taxes on speech. Today, tobacco advertising remains fully deductible as a business expense. It would be ironic to now repeal the deduction for the cost of advertising prescription medications.

  • Our message is not to oppose healthcare reform. We are explicitly opposed to taxing one form of commercial speech – advertising about one class of products (prescription drugs).

  • The proposal would raise little revenue – because of the present decline in spending on pharmaceutical ads, it is estimated that a disallowance of the cost deduction would generate only $900 million a year. This is far short of the $37 billion that some have said would be generated. In order to generate the larger number, we believe the proposal would have to also deny the deduction for the cost of salaries to sales personnel for pharmaceutical companies.