By Dennis Hetzel, Executive Director
Here’s a scary number: Based on our estimates from Newspaper Association of America statistics, the advertising loss could total more than $57 million to Ohio newspapers and their websites annually if a sales tax on advertising becomes reality.
That is on top of the adjustments our members have had to make to severe revenue declines in recent years, from an estimated $2 billion for all Ohio newspapers and their digital products in 2005 to $958 million estimated in 2011.
We arrived at those figures, which very well could be low, based on Ohio’s share of the U.S. population and the feedback we get from major advertisers such as auto dealers that they won’t spend more if there is an advertising sales tax. Their budgets will adjust downward to accommodate what amounts to an increase of 6 percent or more based on local sales tax rates on top of the state rate. The cost of doing business for many of our customers also will explode as a result of this proposal.
The ONA has hired a government relations firm, Capitol Consulting, to help us in our legislative efforts, particularly as we oppose the sales tax expansion.
Dan Jones and his team are doing a great job already with everything from strategic advice to arranging meetings. It is very reassuring to have such experienced and savvy partners as we deal with state government.
Because we are facing so many issues, the ONA Executive Committee this week announced to our publishers and general managers that we are going to seek voluntary contributions based on circulation size to a distinct “legal and lobbying defense fund.” The requested, per-member contribution is less than a cost of quarter-page ad for the vast majority of our members. We hope to raise around $80,000.
We also have launched a confidential survey to measure the impact that an advertising tax would have on our members. This is similar to the helpful study we did in late 2012 on our existing sales tax exemption for circulation sales. We appreciate that this exemption remains in Gov. Kasich’s proposal.
As for the sales tax expansion to services, we continue to hear that the proposal faces political difficulty, in part because so many groups are opposed. However, this cannot be taken for granted.
While one can appreciate the policy reasons to expand sales taxes to services, the way it would be applied would be devastating to our members and our ability to serve our communities. One publisher estimated that a 6-7 percent loss in ad revenue could translate to a reduction of 40 jobs in his already strapped operation.
While newspapers have focused on the advertising tax impact, I think it also is important to recognize the large increase in operating expenses on everything from commercial rent, to credit-card processing to legal fees to accounting services and even to management fees between affiliated companies. I say “may” instead of “will,” because it has been difficult to get direct answers to many of these questions, and that is part of the problem. Uncertainty is not good for business or the state’s business climate.
I am sure we have members that will benefit from the income tax cuts and small-business tax cuts the governor is proposing. However, we do not believe that these benefits will come close to matching the negative effects of the sales tax expansion.
Be assured that we are working hard and working smart to make our views known. Please let us know if you need any material as you make contact with your state representatives and state senators. We also can arrange meetings and find contact information.
And click here to download the latest version of our revised talking points on why the advertising tax is a bad idea.
- County officials skeptical of Kasich sales-tax proposal (from The Toledo Blade)
- At Ohio Newspaper Association convention, Kasich explains decision to tax newspapers (from The Toledo Blade)
- Members briefed on ad tax proposal, other challenges (by Dennis Hetzel, from The ONA Bulletin)
- Lawyers poised to fight Kasich sales tax plan (From Columbus Business First)
- Minnesota governor drops much-criticized business sales tax plan (From The Star Tribune)