Since the founding of this country, growth-conscious American companies have used advertising as a means of pitching Americans on their products and services. The advertising industry has evolved along with the ever-changing needs and wants of the population. Today, however, some in Congress are considering jeopardizing the security of small businesses by tampering with the ad industry in the most groundbreaking way since the 1960s.
Have you noticed the evolution of billboards? They started as paper images pasted to a wooden background or wall. Billboards were this way for generations, and then they began to change as a single film replaced paper. The film was faster to install and lasted longer against prevailing weather conditions. But in what seemed to be a blink of the eye, these billboards were replaced with digital billboards. I previously interviewed the builders of the next generation of billboards. They can cost more than $1 million, but are very cost effective in gaining new customers for advertisers.
The American advertising industry is in fact very efficient and productive. In 2014, Global Insight did a study on the impact of advertising on the American economy. In 2014, advertising spending was $297 billion. This spending generated $5.5 trillion in sales and almost 16 percent of our gross domestic product. Advertising employment amounted to 20 million jobs, or 14 percent of the people employed. Every dollar spent on advertising generated $19 in sales.
Still, these numbers didn’t stop the heavy hand of Big Brother from intervening. In 1965, Congress passed the Highway Beautification Act, which aimed to severely curtail billboards and other forms of outdoor advertisements. Of course, there were unintended consequences of this legislation.
One of the most troublesome effects was that Mail Pouch, the tobacco company that for decades freely painted many of the landmark barns the Baby Boomer generation came to know and love, stopped painting them. This caused many in the industry to lose their jobs as the once beautiful landmarks faded into decay. Unfortunately, many struggling farmers failed to come up with the cash needed to restore them. To this day, some of their ruins remain sitting idly by on the sides of the highway for all passersby to see. So much for “highway beautification.” By destroying these ads, the American people were negatively affected, as was the business community.
Now, 50 years later, the government is again considering interfering in the relationship between buyers and sellers — this time to the extreme.
Soon, Congress will take up the issue of tax reform. Some of our representatives who are looking for new sources of revenue for their new tax reform bill want to alter the rules on the deductibility of advertising expenses. The new regulation that is reportedly under consideration, adopted from the Dave Camp reform bill of 2014, would limit the advertising tax deduction to one-half of what is currently spent in the calendar year, with the remaining 50 percent of advertising expenses spread equally over the following ten years.
Can you imagine the accounting nightmare this would cause for a car dealership or a supermarket chain? How about the tax accounting for every national brand that does TV or print advertising? SJ Insights estimates that we see 5,000 advertising impressions a day. How many of these will the government describe as ads? Although we don’t know if a tax bill will pass with this provision, we must understand and fight the idea.
As I pointed out earlier, advertising is extremely productive in creating jobs and growing the economy. Passage of this bill will take very efficient, productive businesses and force them to lay off workers, while also having the increased burden of tax paperwork that may well close some of these shops altogether.
We have an opportunity to rethink the tax laws in this country, but thinking it is a good idea to destroy the advertising industry in this nation must change. The creative minds in the advertising industry are at risk, as is the American economy.
Treasury Secretary Steve Mnuchin, Rep. Kevin Brady (R-Tex.), Speaker Paul Ryan (R-Wis.), and the rest of the “Big Six” tax reformers are wise enough to know that the correct way to make America great again is to let loose the creativity of the American people, not stymie it. By doing so, perhaps some modern era equivalents of our beloved Mail Pouch signs will appear.
Dan Perkins is an author of both thrillers and children’s books. He appears on over 1,100 radio stations. Mr. Perkins appears regularly on international TV talk shows, he is current events commentator for seven blogs, and a philanthropist with his foundation for American veterans, Songs and Stories for Soldiers, Inc. More information about him, his writings, and other works are available on his website, DanPerkins.guru. To read more of his reports — Click Here Now.
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