March 1, 2002
Legislative Activity
Date: March 1, 2002
To: AAF Corporate Government Contacts
From: Clark Rector, Jr., Vice President-State Government Affairs
Re: Florida Services Tax Proposals
As expected, the Senate Appropriations Committee yesterday passed Senator Don Sullivan's (R-St. Petersburg) plan to repeal sales tax exemptions on select goods and services.
Sullivan's proposal would tax radio and television broadcasting rights and music license fees; public relations services, management services, management consulting services, lobbyist services and political consulting services; and promotion-based advertising, such as coupon promotions and event-based promotions. The committee also passed an amendment lowering the state lottery advertising budget from $35 million to $10 million.
Senator Sullivan is looking to raise $1-billion in new taxes and in a politically astute move has tied the increase to education funding.
Senate President John McKay's (R-Bradenton) services tax proposal is still alive, as well. President McKay would like to repeal most sales tax exemptions and lower the tax rate to 4.5 percent from 6 percent. Unlike Senator Sullivan, McKay claims that his plan is revenue neutral. His tax plan has already passed the Senate. While it has not formally been sent to the House, that chamber sent a message to the Senate by introducing and unanimously rejecting an identical bill.
Governor Bush and House Speaker Tom Feeney have each voiced opposition to the Sullivan and McKay proposals.
AAF Fourth District Legislative Chair Jack Hebert has been in Tallahassee talking to legislators and helping to coordinate advertising industry opposition to these harmful proposals. It is very important that the industry continue to let Florida lawmakers know that we oppose a tax on advertising and other services.
Contact information for Senators and Representatives can be found on the Florida Legislature's homepage at www.leg.state.fl.us/Welcome/index.cfm.
Talking points against the tax are included below. Do not hesitate to give me a call at 1-800-999-2231, if you have any comments or questions.
- National advertising dollars will leave the state. Marketers will move to markets where they can reach the most consumers with the fewest dollars. While the 1987 ad tax was in effect national advertising purchases increased 3 percent. In Florida they decreased 12 percent!
- Border markets will suffer. Media in markets close to the state line will lose money to untaxed media across the border. In 1987, Pensacola broadcasters encountered revenue losses of 45 percent. 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. In 1987, one Orlando station lost $250,000 in revenues.
- An ad tax is too complex and expensive to administer. The Department of Revenue spent millions of dollars to hire over 200 new auditors in 1987. The executive director admitted afterwards, "It was not enough."
- 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.