Askov American., 1943-09-30
Advertising At Your
Expense


The taxpayer is footing the bill
tor many of the millions of dol
lars being spent for wartime
advertising by several of the
large American corporations, ac-
cording to Senator Harry S. Tru-
man of Missouri, in an article in
the September 20 issue of The
Progressive. Because of a pro-
vision in the Federal income tax
law advertising expenses may be
deducted as part of production
costs, thus cutting down the
amount of excess profits subject
to tax. Where war profits are
excessive the large contracts are
subject to renegotiation SO here
also millions of dollars worth of
advertising, treated as an operat-
ing expense, will also figure
prominently.
Senator Truman's article fol-
lows:
Modern advertising is necessary,
constructive and worthwhile. Adver-
tising has played an important role
in the economic and cultural develop
ment of America. It has stimulated
American industry and business. 1t
has promoted better health and bet
ter living. And for the most part
American advertising has told the
truth.
During peacetime, all progressive
corporations make elaborate budget
provisions for advertising their wares.
In this way, the public becomes con-
scious of the value of the articles
these corporations sell as we'll as
the standards of quality which these
products represent.
AS we all realize, the war has pre-
vented the production of most peace
time articles and the producers have
concentrated their talents and ener-
gies upon the production of articles
of war.
However, it is only natural that,
having during peacetime spent mil
lions of dollars to establish good will
and acquaint the consumer with their
product, such companies are anxious
to continue their advertising cam
paigns and keep their names before
the public.
This practice would be perfectly
proper if the corporations paid for
their advertising out of profits after
taxes and renegotiation. Unfortunate
ly it isn't working out that way.
Taxpayers Foot the Bill.
Many of the largest government
war contracts were loosely negotiated
in the first place because of the ne
cessity for speed and the lack Of
knowledge as to what the costs would
be. Therefore, the profits are very
large. Where these profits are exces-
sive, they are subject to excess profits
taxes and to renegotiation.
Yet, here is what is happening with
respect to advertising. Corporations
are spending millions in advertising,
but the bulk of this expense is being
borne not by the corporations but by
the federal government. This is so
because these advertising costs are
being treated as an expense of do
ing business before computing profits
on which the government is entitled
to receive excess profits taxes at
the highest rate.
1t is, therefore, plain to see that
to the extent that advertising can
be written off as part of the cost of
producing the articles of war de-
livered to the government, the ulti-
mate burden on the corporations is
not the cost of the advertising but
only that percentage of the cost which
would remain after the excess profits
tax had been paid and after the con-
tracts had been renegotiated. In
other words, the advertising costs
the corporations practically nothing
because the taxpayer foots the bill.
This happy arrangement for the
corporations has prompted them to
launch vast campaigns of so-called
institutional advertising" Is is vir-
tually impossible today to pick up a
magazine or newspaper without
finding page after page of glowing
tributes to American Industry.
It would almost appear that the
only limit to the number of adver-
tising pages contracted for is the
shortage of paper. And to read the
dramatically written messages and
see the beautiful color photographs
and drawings, one would almost think
that Guadalcanal and North Africa
were not won by our fighting mer