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“A working draft of a House Ways and Means Committee tax reform bill would limit advertisers to deducting 50% of ad expenses per year while amortizing the rest over 10 years.” Adweek.
Our nation arguably has the best communication system in the world. Best of all, much of it is free. These days, you can read the news (and see the video) minutes after any event occurs. If some detail in the narrative is puzzling, you can take a “deep dive” to a number of sources that will define, trend, and explain whatever it was you didn’t understand.
The important word here is “free.” All the power of a half-trillion dollar industry lines up to educate, titillate, or entertain you at no charge every second of every day. All you have to do is agree to watch some advertising that comes with it – a small price to pay for the value received.
Congress seeks to change all of that. The dour old men in the House Ways & Means Committee have thought up a way to get more money out of the economy and into government coffers. Their idea: simply reduce the advertising expenditure deduction by half! The rest, they say could be amortized over a decade. If it happened, U.S. businesses would be faced with a $200 billion tax increase.
That wouldn’t be the end of the tax. The entertainment you now watch for free on video and television would only get half the funding they now enjoy. The likelihood is, there’d be less of them. The information that flows through the Web would be reduced – by half? – since it too is funded by advertising. Newspapers, magazines, radio, even your local movie theater – all would be affected by this measure. The nation would become less entertained, less bright, less informed.
Business equipment can be amortized – its original value reduced for each year of its operational life. But advertising isn’t equipment. It’s ideas. When businesses advertise, they bet that the ideas in their ads will cause you to buy their products or services, once you’ve seen or heard what those are. It will be interesting to see what the operational life of an idea becomes, once it is quantified by bean-counters. More on www.borrellassociates.com