February 5, 2003

Legislative Activity

Date: February 5, 2003:

To: AAF Members in Connecticut

From: Clark Rector Jr., senior vice president-state government affairs

Re: Ad Tax Threat

AAF has received reports that a 6% tax on advertising services has been added to the state budget being considered in the legislature. The budget — including the ad tax — could be put to a vote as soon as tonight. It is very important that representatives of the advertising industry call their representatives immediately and express strong opposition to any tax on advertising. Members of the General Assembly can be reached by calling (860) 0100. You can also find their e-mail addresses by visiting the General Assembly Web page at www.cga.state.ct.us.

Please let me know of any responses you receive. Do not hesitate to call me at 1-800-999-2231 if you have any questions.

The 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 Connecticut 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.