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    Alert - California Ad Tax Proposal

    AAF California Members,

    California State Senator Robert Hertzberg, D-Van Nuys, has introduced legislation that would extend the state’s sales tax to many services, including purchases of advertising “on television, radio, in print, on the Internet, or by any other medium.”

    The bill was introduced in February but has just been scheduled for a preliminary hearing on Wednesday, May 16 in the Senate Governance and Finance Committee.  Representatives of the California Broadcasters Association will be in attendance to oppose the ad tax.

    It is unclear what the prospects for the bill are. Similar measures previously proposed by Senator Hertzberg were not enacted and California currently has a substantial budget surplus so additional revenue would not seem to be needed at this time.

    Nevertheless, lawmaker should hear from the industry that an ad tax is unacceptable and would harm consumers, businesses and the state economy.  Lawmakers and contact information can be found using the search tools on the Senate and Assembly web pages.

    A tax on advertising should be opposed because:

    • Placing a tax on advertising increases the cost of advertising. Because most clients operate on a fixed advertising budget, they will compensate for the tax by decreasing their advertising purchases. This will have a direct -- and negative -- impact on the advertising industry, economy, consumers and the state.
    • Advertising is the primary source of revenue for the print and online media and the sole source for broadcasters. A reduction in advertising would inevitably result in a loss of jobs and a decreased ability to provide quality content and programming.
    • Advertising is the engine that fuels the economy. Less advertising means fewer sales. Fewer sales mean reduced revenue and fewer jobs. Fewer sales also result in less sales tax revenue for the state.
    • Consumers will suffer. Advertising is an important source of information. In fact, the U.S. Supreme Court in the landmark Virginia Pharmacy case noted that to many people, the information in advertising is more important than news about current issues.
    • Prices may rise. Studies show that advertising fosters competition and helps lower the price of products and services. Less advertising means less competition.

     

    Please circulate this alert to colleagues in your company and/or advertising club.  I would appreciate hearing of any replies you may get from your representatives.

    Thank you for your help with this important matter. I will keep you informed of any further developments.

    Clark Rector

    Executive Vice President-Government Affairs

    American Advertising Federation

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