In 2014, an “Advertising Tax” was introduced by House Ways and Means Committee Chairman Dave Camp through a tax reform proposal. Under the tax, advertising expenses would have transitioned from 100 percent deductible normal business expenses, to 50 percent deductible, with the rest amortized over a decade.
Revenue shortfalls prompted the proposal in 2014. Similarly today, tax proposals, such as the Border Adjustment Tax (BAT), are falling by the wayside, prompting House Republicans to search for additional sources of revenue.
Whispers of reviving Camp’s old plan now echo throughout the House Ways and Means Committee once more, headed by current chairman Rep. Kevin Brady (R-Texas). In a statement to The Hill, Brady stated there “may be a need” to reexamine Camp’s revenue raisers.
It’s important to note that the only time the United States has ever taxed advertising was during the Civil War—a period of extraordinary economic upheaval. Directly following the war’s conclusion, the tax was immediately repealed.
Opposition to the Advertising Tax is not exclusive to either party. Currently, a bipartisan coalition of 124 members of the House of Representatives, led by Reps. Kevin Yoder (R-Kan.) and Eliot Engel (D-N.Y.), are working against the implementation of an Advertising Tax.
In a recent letter to Congressional leaders Paul Ryan and Nancy Pelosi, the bipartisan coalition stated, “The potential for strengthening our economy through tax reform would be jeopardized by any proposal that imposes an advertising tax on our nation’s manufacturing, retail and service industries.”
Evidence shows that excessive taxes due to revenue shortfalls often produce the opposite of the desired result. Although the Mellon tax cuts of the 1920s and the Kemp-Roff tax cut of 1981 greatly reduced revenue, even more revenue was generated due to ensuing growth.
Additionally, this isn’t the first time Americans have fought against an Advertising Tax—it could even be said that the United States was founded in opposition to such a tax. The American Revolution was fought in part over the Stamp Act, which taxed a number of items, including newspapers, playing cards, and advertising posters.
When the tax was implemented, George Washington remarked, “The Stamp Act imposed on the colonies by the Parliament of Great Britain is an ill-judged measure. Parliament has no right to put its hands into our pockets without our consent.”
There is also a constitutional case against the tax—namely the text of the First Amendment. The First Amendment explicitly prohibits Congress from “abridging the freedom of speech, or of the press.” An advertising tax would effectively be taxing a constitutional right.
An advertising tax is a temporary solution that would certainly harm our economy in the long run. Beyond that, it’s simply un-American.