As the days quickly fly off the legislative calendar, President Trump and congressional Republicans have declared the passage of tax reform to be a major goal for 2017. Viewing stronger economic growth and job creation as the life jacket for his floundering agenda, Speaker Paul Ryan began this new push by giving a major tax reform speech before the National Association of Manufacturers.
Although tax reform has been needed for more than a decade, and broadening the base by eliminating complex deductions is the best path forward, conservatives must remember to implement their change within the scope of liberty. The tax code should protect our rights, not take them away.
One idea floated by former chairman of the Ways and Means Committee, Dave Camp, in 2014 was changing how the cost of advertising is treated as a business expense. This must not be part of the new reform package. The advertising tax deduction is crucial to small businesses and changing it would create a domino effect that would stifle local economies. Building a successful brand and reaching new customers requires advertising. Not allowing ads to be deductible would be bad for business and kill an industry with tens of millions of jobs. Many companies, especially smaller businesses, would have to cut back if this proposal became part of the tax code.
Currently, businesses have the ability to deduct the cost of ordinary and necessary businesses expenses. These costs are best described as things paid for in order to keep the lights on: rent, utilities, employee wages, and other much-needed supplies. This deduction became codified in 1913 and has been a fixture of our tax code ever since. Advertising has always been considered a part of the listed allowable deductions and considered an ordinary and necessary expense. Some in Congress, however, have begun kicking the tires on taxing paid publicity.
This deduction must stay.
Advertising is an investment that often provides a lifeline to businesses trying to succeed. The ability for businesses to communicate directly with their customers is one of the most important forms of speech that exists, and it has served as the foundation for our free-speech culture for centuries. Without a fully operating stream of advertising revenue &#8212; one without government-placed obstacles &#8212; many of the publications, radio programs, and television shows we all take for granted would not exist.
Taxing advertising is not a new idea, but it&#8217;s always been a bad one. In the 1760&#8217;s, the British inflamed revolutionary fervor in the American colonies by imposing the Stamp Act, which, along with other duties, charged a tax of two shillings for every advertisement placed in newspapers and pamphlets. Our forefathers rightly protested this tax as an attack on the freedom of expression, which serves as the fountainhead of our liberty and democracy.
Since the late 1980&#8217;s, over 80% of the states have debated and abandoned the taxation of advertising. In Florida, the only state that actually sanctioned such a tax on advertising, legislators swiftly overturned the plan after realizing its administration was nearly impossible and its impact on the economy was self-defeating. When the cost to advertise rose, businesses began advertising less often, which hurt bottom lines and led to less tax revenue heading into the state treasury&#8217;s coffers.
It hasn&#8217;t been tried on a large-scale ever since.
Although the likely fiscal effects of this proposal should be enough to prevent enactment, conservatives should recognize how this proposal goes against the principles of those who are committed to defending the Constitution. Taxing speech strikes at the very heart of our liberties found in the Bill of Rights. The First Amendment to the Constitution prohibits Congress from &#8220;abridging the freedom of speech, or of the press.&#8221;
Luckily, a group of 124 members of the House, led by Reps. Kevin Yoder (R-KS) and Eliot Engel (D-NY) have begun the fight to protect our free speech rights. In a recently drafted letter to congressional leadership of both parties, this working group stated, &#8220;The potential for strengthening our economy through tax reform would be jeopardized by any proposal that imposes an advertising tax on our nation&#8217;s manufacturing, retail and service industries.&#8221;
The American people understand when their liberties are threatened. Republican Chairman of the House Ways and Means Committee, Kevin Brady, should learn from history and reject a tax burden placed on commercial speech. Conservatives should be on the watch to protect the First Amendment from anyone who threatens it. We must say no to taxing advertising.
Matt is an entrepreneur and recovering politico. You can follow him on Twitter at <a href="https://twitter.com/search?q=%40MChisholm&amp;src=typd">@MChisholm</a>.

Will Republican Tax Reform Abandon The First Amendment?

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Matt Chisholm

Will Republican Tax Reform Abandon The First Amendment?