April 23, 2004

Legislative Activity

Date:April 23, 2004

To: AAF Texas Members

From: Clark Rector , SVP-state government affairs

Re:Texas Special Session

As you know, the Texas Legislature is meeting in special session to consider the school finance issue and reform of the so-called “Robin Hood” property tax structure.

We understand that one of the proposals being seriously considered on the House side is an expansion of the sales tax to include all products and services with the exception of food and medicine. House leaders will be meeting to write their bill over the weekend.

It is extremely important that members of the advertising industry contact their representatives now and urge them to oppose any tax on advertising. You can find your representative, along with e-mail addresses and phone numbers by going to the House of Representatives Web page at www.house.state.tx.us/welcome.php.

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.