ad tax deduction

Lawmakers and officials struggling with poor finances in North Carolina, Illinois, Pennsylvania and California are eyeing a tax on advertising as a way to help solve state budget crunches. At the federal level, lawmakers are looking at limiting the advertising tax deduction as part of broader federal tax reform.

The advertising tax deduction is still in play as part of comprehensive tax reform. But this round, it’s only one of six options for squeezing more tax dollars out of the business community. The six options were offered in the business income tax report, one of five bipartisan reports produced by working groups on the Senate finance committee.

Nearly 60 lawmakers have signed on to a “dear colleague” letter to ensure that a broad tax reform package does not change the current tax deduction for advertising expenses.

Tom Harkin (D-Iowa) and Richard Blumenthal (D-Conn.) have introduced a bill called the Stop Subsidizing Childhood Obesity Act, that would prohibit deductions of expenses from the advertising of foods and beverages of “poor nutritional quality” that are marketed to kids. The proceeds would go to a government program that provides fresh fruit and vegetable snacks to low-income school children.

The fate of the advertising tax deduction on the Senate side now rests with Ron Wyden (D-Ore.), who was officially confirmed by the Senate as chairman of the powerful finance committee on Thursday. Wyden succeeds Sen. Max Baucus (D-Mont.), who was confirmed last week as ambassador to China. Before his appointment, Baucus had proposed a tax reform package draft that included a limit on the advertising tax deduction by half in the first year, with the rest amortized over the next five years. It’s hard to predict how Wyden will respond as chairman.