Free speech in America has been under significant attack over the past few years, whether it be rioters trying to silence speakers on college campuses they don’t agree with or boycott campaigns against companies that engage in political speech, to name a few of the many and ever-frequent examples.
That is why a recent proposal in Congress that essentially taxes speech is so worrisome.
When we think of “speech,” many of us first think of explicitly political dialogue. However, speech in fact covers everything from our economic interactions to social activities.
One of the most essential forms of economic speech is advertising. It’s how businesses inform consumers and other organizations about the kinds of products and services they offer. It is essentially the lifeblood of capitalism, and some members in Congress are right now itching to tax it.
Reportedly being considered as part of the upcoming tax reform legislative package is a proposal that would change the way advertising expenses are deducted from business’ taxable income. Current federal tax law permits businesses to deduct all their advertising expenses (such as television ads and marketing materials), allowing them to engage in the marketplace of ideas relatively freely and on their own merits.
However, the new proposal that Congress is considering would take these expenses and make them only 50% deductible in the year they were spent while the rest would have to be deducted in chunks over 10-years. Ways and Means Committee Chairman Kevin Brady (R-TX) and the rest of the “Big Six” GOP tax reform team need to ensure this change is not made, that economic speech remains protected, and American innovation can continue to thrive.
While the proposal may seem like just a small change in our tax code, it nonetheless adds significant regulatory and financial burdens on businesses that will reduce jobs, dampen growth, and deprive consumers of information necessary to make informed choices.
Not only that, but the tax is also suspect on constitutional grounds. Courts have engrained an extremely strong precedent against government hurdles to speech. Courts have also acknowledged the truth that the “power to tax is the power to destroy,” as Chief Justice John Marshall said in our country’s early years. The proposed advertising tax, being both against speech and a tax, is a fly in the face of our constitutional principles.
An over 120-member bipartisan coalition in Congress led by staunch conservative Congressman Kevin Yoder (R-KS) and firm liberal Congressman Eliot Engel (D-NY) has already formed to oppose this proposed tax, acknowledging the fact that it would hurt Americans of all backgrounds and professions.
Advertising taxes are a poor, but not new, big-government idea. Florida experimented with one in the 1980s. It quickly failed in spectacular fashion and was repealed after just a few months. The current advertising tax proposal in Congress was originally proposed in 2014 and has slowly been edging its way to the surface since.
The most immediate economic effect of the proposed tax would be a decrease in consumer choice, as the flow of information that is so essential to the free market will slow down dramatically.
One of the biggest complaints about Obamacare is the fact that in many counties there is only one health care provider and an expensive one at that. The proposed advertising tax would slowly restrict consumer choice to a level that rivals or even exceeds Obamacare, as it would affect all businesses, industries, and eventually people as well.
Perhaps the most dangerous aspect of this proposed tax however is what comes after it. Political economy philosophers such as Friedrich Hayek understood that economic and political liberty are inseparably linked. If suddenly we get used to legislating against economic speech, then it might only be a matter of time before we accept more restrictions on political and social speech as well.
America’s ingenuity, prosperity, and liberty is only possible with our constant defense of it. The proposed advertising tax is a reckless big-government proposal that would strike directly at our personal liberties and economic opportunity. It is against the spirit of our Constitution and dampens the flow of information that is essential to making the free market work.
If Congress wants to reform our tax code to promote innovation and growth, it should look elsewhere rather than restricting economic speech. Our freedom of speech, of all things, should be cherished — not taxed.