Congress considering changes to the tax policy that will effect advertising spends

. According to the IAB, the proposed tax legislation that will be coming to the floor for review will move advertising, as a line item expenditure for businesses, from 100% deductible to 50% deductible in year one, with the remaining 50% of the expenditure to be deducted equally over the following 10-year period. Since much of advertising is designed to generate a response, increase sales, and build brands today, the timing of this expense allocation makes little sense and is purely motivated based on increasing the governments tax receipts. It has the potential to dramatically impact how clients will view and spend on advertising as a marketing tool. One immediate hit will be an automatic increase to the ROI requirements required by clients on their spend because the “total cost” of advertising would now be higher. In the digital realm, his could have the unintended consequences of accelerating the pace of technological change for more invasive ad targeting as publishers chase tools to delivery higher ROI. User privacy and the policing of invasive ad targeting is a battle congress is also battling, so raising the bar on effective ROI through higher taxes, will likely increase the focus on ad targeting as those who deliver ads will have little choice but to increase targeting methods in order to deliver results against a higher ROI bar, in order to maintain their share of ad expenditures. If you are in the advertising business, it’s time to write your congressman and get your voice heard.