At a recent campaign stop in Iowa, Democratic presidential candidate, Hillary Clinton, proposed “cracking down on direct-to-consumer advertising.” Ads for prescription drugs “can include confusing, misleading, or incomplete information or exaggerated claims if not regulated effectively,” a campaign memo notes. She said she would eliminate corporate write-offs for direct to consumer advertising [costs] and establish required FDA pre-clearance for such ads.
The proposal ignores the many demonstrated benefits of pharmaceutical advertising to consumers and the fact that the Food and Drug Administration already carefully scrutinizes DTC ads. The agency provides strict standards for describing a drug's side effects in advertising. In addition, pre-clearance of advertising and a different tax treatment based upon the content of the ads are both very clearly unconstitutional.
In an op-ed column for The Wall Street Journal entitled “My Tax Overhaul to Unleash 4% Growth,” Republican presidential candidate, Jeb Bush, may have opened the door to a change in the federal tax treatment of advertising expenses.
In the article, Bush said, “We will...allow businesses to fully and immediately deduct new capital investments...To pay for this, we will eliminate most corporate tax deductions – which is where favor-seeking and lobbying are most common – and remove the deduction for borrowing costs.”
It is unclear at this time what Bush means by “most corporate tax deductions.” It could mean a broad range of special incentives such as renewable energy credits and the investment credit. However, the reference to eliminating the deduction for borrowing costs suggest that it could mean repeal of some or all section 162(a) business expenses possibly including advertising.
AAF will carefully monitor announcements from all candidates for further details.