January 10, 2002

Legislative Activity

Date: January 10, 2002

To: AAF California Members

From: Clark Rector, Jr., Vice President-State Government Affairs

Re: Florida Advertising and Services Tax Threat

As promised, Senate President John McKay has introduced Senate Joint Resolution (SJR) 938, which would amend the state constitution to require the sales tax be extended to nearly all goods and services, including advertising, sold in the state. The proposal would lower the overall sales tax rate from 6% to 4%. This is the lure to gain support for ad taxes. If approved by the legislature (the Governor has no opportunity to approve or veto the measure), the amendment would be placed on the November 2002 ballot for approval or rejection by Florida voters.

You can see the full text of the resolution at www.leg.state.fl.us/cgi-bin/view_page.pl?Tab=session&Submenu=1&FT=D&File=sb0938.html&Directory=session/2002/Senate/bills/billtext/html/ (html) or www.leg.state.fl.us/data/session/2002/Senate/bills/billtext/pdf/s0938.pdf (pdf).

Senate President McKay has made it clear that the services and advertising tax is a top priority for his last year in office (he must leave due to term limits), and he will be putting serious pressure on legislators to approve the plan.

Urge your legislator to say NO to SJR 938 - ad taxes.

Florida went down this road before and it ended in disaster. The 1987 services tax was repealed after only six months. The tax should be rejected again because:

  • 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%. In Florida they decreased 12%!
  • 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%. 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."

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.

Didn’t lawmakers learn from the failed 1987 experience? Senate President McKay’s ad tax would destroy the health of Florida’s advertising industry. You and every member of your advertising club must e-mail or call your senators and representatives and tell them to oppose the advertising and services tax. Once is enough!

All contact information for legislators can be found on the Florida Legislature’s Web site at www.leg.state.fl.us/Welcome/index.cfm.

Do not hesitate to call me at 1-800-999-2231 if you have any questions.