Last month, House Ways and Means Committee Chairman Kevin Brady outlined his vision to "go bold" with tax reform for the good of the American people. In an attempt to pass the legislation before the August recess started, Chairman Brady admitted that “there may be a need” to adopt part of former Chairman Dave Camp’s 2014 tax reform plan, which prominently features a $169,000,000,000 tax on advertising.
In 1987, Florida’s Republican Gov. Bob Martinez signed legislation which introduced a 6 percent ‘surcharge’ on advertising in an attempt to raise more tax revenue. Advertising spending declined by 12 percent overnight, which cost 50,000 workers their jobs and reduced personal income by $2,500,000,000. To add insult to injury, Florida ended up spending more money enforcing the law than they received in additional tax revenue.
The New York Times reported that Gov. Martinez “suffered political embarrassment in his first year in office by having to shift from ardent support of the tax to advocating its repeal.” After vocal public outrage, the Florida state legislature sensibly repealed the bill within six months of its passing. Ultimately, this free speech tax cost Gov. Martinez his re-election to Democrat Lawton Chiles, who won by a landslide 13-point margin.
While many House Republicans claim to support all forms of free speech, their new proposal to tax commercial advertising represents a crushing blow to not just free speech rights, but also to America’s economic future.
Currently, business owners can deduct their advertising costs like any regular business expense. The proposed legislation would force business owners to amortize 50 percent of their advertising spending over 10 years, which would raise federal revenues by $169,000,000,000.
According to a recent study from IHS Global, advertising is an industry that supports over 20,000,000 American jobs, with the total impact of representing 19 percent of American GDP. Every direct job in advertising supports another 34 jobs across America, while every dollar spent on advertising yields $19 of economic output.
While there is no doubt that this tax would decimate an industry responsible for much of America’s economic growth, it is even more alarming that a GOP-led Congress would even entertain the idea of further restricting free speech.
In 1945, the U.S. Supreme Court issued a landmark ruling in Thomas v. Collins, which overturned a Texas statute that allowed the state to regulate and control commercial speech. The court argued that “any attempt to restrict those liberties must be justified by clear public interest,” which set the precedent for First Amendment protection of all forms of speech, including commercial speech.
The 1973 ruling in Bates v. State Bar of Arizona reinforced the earlier decision, with the Warren court arguing that Arizona had violated the First and 14th Amendments in restricting commercial free speech. The court went a step further and asserted that commercial advertising “performs an indispensable role in the allocation of resources in a free enterprise system.”
While there is no de jure provision in this legislation to directly limit the speech of advertisers, a $169,000,000,000 tax coming out of the pockets of business owners is a de facto restriction of their First Amendment rights.
This is not just wrong. It is a blatant violation of everything the Republican Party claims to stand for.
The American people deserve fair and comprehensive tax reform, rather than a bill that would kill jobs and further restrict the rights of free speech. If Congressional Republicans truly want to put America First, they would be wise to avoid this short-sighted and foolish measure.