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Ad tax tribulation

Our potholed city street grid looks like the target of a meteor shower. The Tucson Police Department is so understaffed that Krispy Kreme stock has plunged 30 percent. Nothing's likely to improve unless City Manager James Keene finds an extra $39.4 million to balance his proposed billion-dollar budget. And Keene hopes to raise $3.6 million of that by talking the City Council into a 2 percent advertising tax to be collected from local media outlets.

The media outlets, of course, are screaming.

The tax would be a disaster for the ad industry and the local economy, they cry. Brandishing a study prepared in 1990 to fight a proposed (and ultimately defeated) state ad tax, such taxation wouldn't raise as much money "as would have been raised by the tax on retail sales that would have been collected had the ad tax money been used, instead, for retail advertising." And of course, they insist, retail advertising will decline if retailers have to pay an extra 2 percent for every ad.

This is a negligible sum for a mom 'n' pop store buying a cheap radio spot, but it does represent a huge added expense for, say, a car dealer who sinks a half-million dollars a year into newspaper display ads. And it's the retailers who would pay the tax; local media moguls certainly aren't going to absorb it.

Advertising will decline; jobs will be lost; and, unlike the many other American cities that have survived the establishment of an ad tax, Tucson will cease to be a beacon of laissez-faire civilization in the Western world.

To mobilize against the forces of darkness, the Tucson Advertising Federation invited the mayor and the entire City Council to hear its members' concerns at its luncheon on Tuesday, May 18. But when four council members gather in the same place, that's a quorum with certain legal implications, so only three council members showed up--the three who are most adamantly opposed to the ad tax.

"It's important that when the government tries to solve its problems, it doesn't create problems for other people," declared Ward 5 Democrat Steve Leal, in pledging a "no" vote on the tax.

"I believe we can support the budget we have now" without new taxes on advertising, garbage and domestic rentals, said Ward 1 Democrat Jose Ibarra. "It's a question of making cuts, and where the cuts are coming from."

Ward 3 Republican Kathleen Dunbar, still smarting from criticism by Ibarra and others for her vote to raise fees for the city's heavily subsidized KidCo after-school program, complained, "We have a mayor and council who are not willing to make the tough cuts. Republicans were accused of balancing the budget on the backs of children by instituting a 52 cent-per-day fee for KidCo. But when we tried to make the tough cuts, we couldn't get the four votes to make them."

Said Ibarra, "KidCo shouldn't be on the same table as these taxes. It isn't kids vs. the advertising tax, or cops and firefighters vs. the advertising tax. Trading a tax for kids' programs is a violation of the fundamental aspects of what we're trying to build as a community."

According to Leal, "We have some options that aren't draconian and mean-spirited." He mentioned cutting the money for City Council junkets and subscriptions, but that would barely begin to cover the proposed budget shortfall.

Another question, they seemed to agree, was whether the city actually needs a budget as big as the one Keene has proposed, and all three council members happily sniped at Keene and his staff for various shortcomings. They obviously sensed they were among friends.

Except maybe Dunbar, who joked that she favored a newspaper tax because the Star and Citizen editorial boards had been so mean to her. At least it seemed to be a joke, though she did raise the issue more than once, apparently forgetting that there's a high, thick wall between a newspaper's editorial board and its sales staff.

At any rate, Dunbar said she was confident that the ad tax would fail when it comes to a vote, scheduled for June 30. Ibarra wasn't so sure that a fourth "no" vote was forthcoming, and worried that if the council votes down the garbage tax on June 7, it will create pressure to pass the other tax measures.

Would it really be so awful if the 2 percent ad tax went into effect? The amount of advertising might well decline a bit, especially for mid-sized businesses that have to choose between paying an extra 2 percent on ads and giving to charity. Yet newspapers and broadcasters lose advertisers every month, even in good times; some retailers simply don't benefit from advertising with them.

Perhaps the ad tax would force local media sales staffs to become more competitive. The consolidation of the Star and Citizen sales force more than 30 years ago put an end to rate wars in the local print media; if anything, small weekly papers (like the one you're reading now) feel free to raise their ad rates to approach parity with the big dailies. At least there's still competition among local broadcasters, even though they're fighting cable, home video and the Internet for an audience, and despite the growing hegemony of corporate ownership.

In a free market, competition is supposed to be a good thing, isn't it?

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