Washington Digital Ad Tax

WASHINGTON, December 17, 2020
—AAF Washington Leaders: Washington State Representative Vandana Slatter (D-Bellevue) has a released a draft proposal to tax the sales of digital advertising in the state. For the reasons below, I urge you to email Rep. Slatter and other members of the legislature and urge them to oppose any effort to tax digital advertising in Washington.

Please forward this alert to the members of your ad club and encourage them to contact lawmakers ASAP to build opposition to the tax before the measure is formally introduced.

Tax advertising is taxing speech.  A digital ad tax would harm not just media companies that sell advertising, but every Washington company that uses advertising to communicate with consumers, as well as the advertising agencies, production houses, photographers and countless other suppliers that create advertising. 

It is important that lawmakers understand the importance of advertising to the economy of Washington.  Advertising is an important driver of economic growth and jobs in the state. 

According to a study designed by a Dr. Lawrence Klein, winner of the 1980 Nobel Prize in Economics:

  • Advertising helps generate $146.7 billion or 16.2% of economic activity in Washington,
  • Advertising helps produce 485,557 or almost 15.4% of Washington jobs,
  • Every $1 million spent on advertising supports 58 Washington jobs

Increasing the cost of advertising through a digital ad tax, would inevitably cause those numbers to fall.  Since most advertising budgets are fixed, increasing the cost of advertising would result in less advertising leading to a number of negative consequences.

Advertising is the main and often only source of revenue for the media, including online media.  Less advertising could lead to a reduction in jobs as well as a decreased ability to provide quality content and programming. Online media may have to resort to putting up a paywall which would have a disproportionate impact on low-income consumers. Many advertising dollars will leave the state altogether as marketers will choose advertising venues that do not charge a premium.

The negative affect would also be felt by other Washington businesses such as the advertising agencies, production houses, web designers and other service providers used by clients.  Advertising services are very portable.  Clients can easily contract with out-of- state agencies and services providers to avoid the tax, thereby putting their Washington competitors at a disadvantage.

Consumers would suffer also as less advertising means less information about available goods and services.  Advertising fosters competition which spurs innovation and often leads to lower prices.

Advertising is the engine that fuels the economy.  Less advertising means fewer sales.  Fewer sales means reduced revenue and fewer jobs.  Fewer sales also result in less sales tax revenue for the state.

Please let me know if you have any questions or of any responses you receive. Thank you for your work on behalf of the advertising industry.