A tax on advertising is the media and marketing industry’s worst nightmare. That’s why broadcasters and advertisers are experiencing a lot of sleepless nights right now in several states where legislators are seriously considering such a tax.
Taxing advertising or limiting the advertising tax deduction at either the state or federal levels could take millions, if not billions out of ad budgets. For media companies across all platforms dependent on advertising, it would be a huge blow to the top line.
While proposals to tax advertising usually get beaten back, it also usually takes a concerted lobbying campaign by broadcasters and advertisers to do that.
Today, lawmakers and officials struggling with poor finances in North Carolina, Illinois, Pennsylvania and California are eyeing advertising as a way to help solve state budget crunches. At the federal level, lawmakers are looking at limiting the advertising tax deduction as part of broader federal tax reform.
None is closer than North Carolina to actually imposing a tax on advertising on all media, from broadcasting to outdoor and print to the Internet.
The state Senate has passed a bill that includes a tax on advertising and other services that could bring in $171.3 million a year. The House budget bill doesn't include the ad tax so whether it the tax stays or goes will be up to the conferees from They have until Aug. 14 to sort it out.
“North Carolina bears watching,” says a lawyer/lobbyist familiar with the legislative process there.
“The communications media — broadcasters, newspapers, cable, outdoor, all distributors and users — we’re all of the view that taxing advertising would be an unwise public policy. If you start creating disincentives for businesses to advertise, you end up unintentionally harming the economy.”