Broadcasting Telecasting (Oct-Dec 1957)

BROADCASTING THE BUSINESSWEEKLY OF TELEVISION AND RADIO Vol. 53. No. 20 NOVEMBER 11, 1957 BALTIMORE PROPOSES 9V2% AD TAX BITE • Broadcasters, advertisers unite in opposition, fear trend • Mayor's plan asks 7y2% tax on ad sales, 2% on ad receipts Baltimore broadcasters — faced with economic strangulation by a city administration that wants to balance its budget at the expense of all advertising media — are finding broadcasters everywhere sharing their apprehension. Baltimore Mayor Thomas D'Alesandro Jr.'s twin proposal would place a sales tax of 7V2% on sales of advertising along with a 2% levy on gross receipts from advertising. City Budget Director Charles L. Benton claims this could mean an extra $4.2 million for Baltimore's coffers. Should the proposal become a reality, there's speculation as to how the get-richquick germ might infect other cities and even states. At the present time broadcasters in five states and Hawaii already are subject to business taxes on their gross receipts. One day of reckoning may be next Wednesday when the City Council holds hearings on the proposal. As of last weekend, broadcasters were uniting forces with other media and allied groups in a determined effort to stop the plan. In the forefront is the Maryland-D. C. Broadcasters Assn. along with Maryland Press Assn., the Advertising Club of Baltimore, Baltimore Public Relations Councils, merchant organizations, trade unions and countless individuals, all unanimous in the stand that advertising media and local business as well would be throttled by the measure. In addition, support of the fight against the tax is coming from outside the Baltimore area from stations and groups such as the Television Bureau of Advertising. Following initial approval of the plan by the local board of estimates, broadcasters met the morning of Nov. 1 and drafted opposition resolutions that were carried over to an afternoon meeting with other groups. Each broadcaster registered personal protests with the mayor and city council. It was pointed out that a loss of revenue by media would pave the way for an economic decline in Baltimore business generally. Stations would be forced to pass the 1V2% bite on to advertisers in the form of higher rates, while advertisers would be faced with a higher cost per impression. Advertisers generally would be reluctant to raise budgets in the area and in some cases it is reported, would cancel. There was some talk that broadcasters might even be forced to relocate beyond the city limits. The point was raised that stations outside of Baltimore would enjoy a competitive advantage from lower rate cards not affected by the proposed tax. Critics of the plan also contend that adoption could bring a similar statewide tax from the Maryland General Assembly. Fred S. Houwink, president of the Maryland-D. C. Radio & Television Broadcasters Assn., sent a formal protest last Wednesday to the mayor and city council in which he termed the tax discriminatory. "A tax on advertising could be used to drive local radio and television stations and newspapers out of business, depriving the people of their right to news and information and impairing the nation's communication system. Taxes of this nature could provide the means for bringing such great pressures on the fourth estate that our priceless freedom of the press would be lost," the radio-tv association declared in its official protest to the tax. In another protest lodged in his capacity as general manager of WMAL-AM-TV Washington, Mr. Houwink said the tax would prove an economic drag on Baltimore and could ultimately drive various advertising media out of the city. TvB President Norman E. Cash, in a telegram to President Leon Abramson of the Baltimore City Council and Mayor D'Alesandro, said the "revolutionary" tax "would inevitably lead to a great diminution of advertisers' investment in Baltimore which would directly trace to lower sales, jobs and Baltimore's D'Alesandro SCREWBALL OR GENIUS Of Mayor Thomas D'Alesandro Jr.'s advertising media tax proposal, the Baltimore Evening Sun climaxed its opposition editorial: "They [the mayor and his followers] may think they are geniuses for thinking up something original. The difference between the genius and the screwball, however, is not too wide. The screwball is the man whose genius produces something that will not stand the test of experience . . ." the economic and political life of one of our major cities which, under your direction is now contributing so strongly to our economy, defense and culture." Instead of spending in Baltimore at their current rate, he suggested, advertisers faced with the tax would divert some of their Baltimore budgets to "neighboring cities" and to "other great cities of the country" with which, as a city, Baltimore is in competition. Mr. Cash stressed advertising's "necessary role in creating this desirable economy" in which the U. S. has raised "the levels of our standard of living," as compared with the rest of the world. Taxes on advertising already are in effect in five states: Arizona, Delaware, Indiana, New Mexico and West Virginia, though on a more moderate scale than the Baltimore proposals. Most recent setback to radio-tv came this summer in Hawaii where the Hawaiian Assn. of Radio & Television Broadcasters fought a 3V2% territorial tax on business concerns that was extended to broadcasters. In that particular instance, the added cost was not passed along to advertisers until the U. S. Supreme Court finally upheld the legality of the tax [International, Sept. 23]. New Mexico in the fall of 1951 was successful in imposing a 2% sales tax on all intra-state advertising receipts. While a lower court had ruled that broadcasting was exempt because of its inter-state character, the New Mexico Supreme Court reversed the decision holding that the tax should be paid by radio-tv stations on local advertising billings. An unsuccessful attempt was made in 1951 to impose a privilege tax on Oklahoma stations and a 5% tax on gross receipts of Oklahoma stations. The privilege tax or license would have imposed a levy of 1 0 cents per watt, or a total tax bill of $5,000 for a 50 kw outlet. Of the gross receipts tax, 5% would have been applied to the Oklahoma state tax commission and the rest to general revenue. The commission would have received 2% of the license income, with the rest to general revenue. Broadcasting November II, 1957 • Page 27