May 19, 2004

Legislative Activity

Date: May 19, 2004

To: AAF Texas Members

From: Clark Rector , SVP-state government affairs

Re:Texas Special Session

As you know, the Texas legislature adjourned the special session on Monday without reaching any consensus on reforming the state's property tax and “Robin Hood” school finance system.

The House of Representatives briefly considered extending the sales tax to many services, but not advertising services. Most services were removed from the final version sent to the Senate. However, that bill did include a tax on outdoor advertising.

It is unclear what will happen next. Governor Rick Perry has indicated his intention to call another special session, but has not said when. House Speaker Tom Craddick and Lt. David Governor Dewhurst have appointed two special committees, one to discuss education reforms and the other to assess ways to reform the property tax and change how the state pays for public education. Neither committee has announced any meeting dates.

Senator Florence Shapiro (R-Plano) and Representative Kent Grusendorf (R-Arlington) will chair the committee on education reforms. Other members include Senators Robert Duncan (R-Lubbock), Todd Staples (R-Palestine), Royce West (D-Dallas), Jane Nelson (R-Lewisville) and Frank Madla (D-San Antonio) and Representatives Dianne White Delisi (R-Temple), Helen Giddings (D-DeSoto), Bob Griggs (R-North Richland Hills), Carl Isett (R-Lubbock), and Rene Oliveira (D-Brownsville).

Senator Steve Ogden (R-Bryan) and Representative Talmadge Heflin (R-Houston) will chair the committee discussing how to change how the state pays for public education. Other members include Senators Gonzalo Barrientos (D-Austin) Ken L. Armbrister (D-Victoria), Kyle Janek (R-Houston), Kim Brimer (R-Fort Worth), and Tommy Williams (R-The Woodlands) and Representatives Fred Hill (R-Richardson), Jim Keffer (R-Eastland), Vilma Luna (D-Corpus Christi), Jim Pitts (R-Waxahachie), and Allan Ritter (D-Nederland).

Members of the advertising industry should contact the senators and representatives on the second committee. Let them know you appreciate the fact that a tax on advertising was never seriously considered by the legislature during the special session and you hope the committee will continue to look elsewhere for any new revenue.

We will let you know of any further developments. Do not hesitate to call me at 1-800-999-2231 if you have any comments or questions.

An advertising tax should be opposed because:

  • National advertising dollars will leave the state. Marketers will move to markets where they can reach the most consumers with the fewest dollars. Florida taxed advertising for six months in 1987. While that tax was in effect national advertising purchases increased 3%. In Florida they decreased 12%!
  • Advertisers can reach many Texas consumers using untaxed out of state media from across the border. During the 1987 Florida tax, Pensacola broadcasters encountered revenue losses of 45%. Most of that money went across the border to competitors in Mobile, Alabama.
  • Local media will suffer huge losses. Advertising is the primary source of revenue for the print media and the sole source for broadcasters. A reduction in advertising would inevitably result in a loss of jobs and a decreased ability to provide quality content and programming.
  • An ad tax is too complex and expensive to administer. The Florida Department of Revenue spent millions of dollars to hire over 200 new auditors in 1987. The executive director admitted afterwards, "It was not enough."

A tax on advertising is bad public policy:

  • Placing a tax on advertising services and/or placement increases the cost of advertising. Because most clients operate on a fixed advertising budget, they will compensate for the tax by decreasing their advertising purchases. This will have a direct -- and negative -- impact on the advertising industry, economy, consumers and the state.
  • Advertising is the engine that fuels the economy. Less advertising means fewer sales. Fewer sales mean reduced revenue and fewer jobs. Fewer sales also result in less sales tax revenue for the state.
  • Prices may rise. Studies show that advertising fosters competition and helps lower the price of products and services. Less advertising means less competition.