The Advertising Industry Takes on Tax Reform

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Dec. 16 (Bloomberg) –- Association of National Advertisers’ Daniel Jaffe discusses the fight against a new advertising tax proposal. He speaks with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

Relations office in washington, d.c. good to have you with us.

Just explain for those who may not be following this issue.

What is being debated in washington?

As you know, advertising is one of the major engines of the economy in our society and throughout the whole of the history of the tax codes since the federal tax code when into effect in 1913. advertising has always been allowed to be deducted in the year where there have been expenditures.

The dollars you spend this year will be deducted in that year as well.

Now there are proposals to change that to say that you can did that 50% and that the rest will either be amortized over five years -- and there has even been talk that you will have to pay over 10 years.

This would have hundreds of billions of dollars of impact on the advertising community, which would certainly slow the advertising effort in this country.

Which could bring down -- jobs are driven down by advertising.

21 million u.s. jobs are directly related to advertising.

It would cut down on the whole economic activity in this area as we are trying to climb back out of the recession.

This is a very serious issue for the advertising community.

Just to be clear, this is a change in the tax code that would be affecting those companies who spend money advertising.

Currently, they are allowed to deduct that advertising spend completely in the year in which it is booked.

Exactly.

What is significant is that this proposal does not affect just one segment of the economy, or one group within the economy.

Almost every group in our society that is in business uses advertising to generate sales.

We have studies that show, and economic model created by a nobel laureate in economics shows that in every state of this country this would have profound impacts of bringing down the number of jobs and the amount of economic activity so far growing forward.

Have social network companies , such as twitter and facebook, have they expressed any of their thoughts about this issue gekko -- this issue?

These seem to be businesses based on advertising almost exclusively.

The whole media community is -- is deeply concerned.

Broadcasters get 92% of all their money or from advertising.

Newspapers, magazines, the internet as you mentioned, twitter -- all of the new forms of advertising, everyone of them would be severely hurt.

And if you are a new form trying to break into the market place, this will hit you particularly hard.

Because you need every dime to try to be heard and keep your nose above the water.

Amortization, the idea that a certain portion of the ad spent would be amortized over future years, isn't amortization usually used for the useful life of machinery?

How could you quantify the future life of advertising?

We don't think you can do that properly.

And to other nobel laureates in economics looked at this issue.

Both of them said there was absolutely no economic or tax basis for having this extensive life for advertising.

I don't think anybody believes that the ad they will see on your show in the next couple of minutes is still going to be selling products five years from now.

You heard making use talk about facial recognition and advertising is -- advertisers trying to come up with some way to protect privacy.

What is the stance of your group on using facial recognition technology?

What we have been doing across the whole of the privacy framework is to try to set up systems to give more protection to more consumers.

We have something called the digital advertising alliance that deals with this issue on the internet.

It has now been extended to mobile.

We look at all of these issues and we do not have a stance yet on visual recognition.

As privacy concerns arise, we always try to find self- regulatory means for consumers

This text has been automatically generated. It may not be 100% accurate.

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