Representatives from local newspapers and businesses have met with many Councilmembers this past week to speak out against the proposed taxes on advertising and personal information. We’d like to summarize why the proposed tax will further endanger local news.
Local news media connects our community. It covers news that deeply affects residents and provides outlets for the arts, businesses and government to share their stories. What is the current state of local media? It’s grim.
• Although news reporters are on the streets every day during the pandemic, reporting on
their communities, and District residents have an almost-insatiable desire for local news
right now, advertisers have stayed away. Most businesses are just beginning to think
about re-opening and they are hurting economically. Most members have seen a 50-
75% drop in advertising revenue since March, and a nearly 100% drop in revenue
associated with events. Several members are forecasting advertising to be down by
40% through the rest of 2020.
• Advertising dollars are the main source of revenue for many news operations. Free
publications rely almost 100% on advertising and event revenue. Many businesses have already closed during the pandemic and some have not paid their advertising bills,
leaving news publications holding the bag. It is farcical to imagine that newspapers will
be able to charge their customers a 3% increase, when even before the pandemic,
advertising rates were flat or falling. Local news media does not have an army of
accountants to figure out how to pay this complex and wide-ranging tax.
• Emergency grant and PPP money has run out and most news media outlets have laid off
or furloughed staff. At best, our members have instituted pay cuts of around 20%. Even
before COVID, the profit margins for news operations are extremely small – less than 5%
in some cases. Publishers cannot absorb a 3% tax on their gross revenues – and their
advertisers are too price-sensitive to accept a 3% increase. This tax will force
additional layoffs and may mean that some outlets decide to close.
Pandemic aside, a tax on advertising and personal information would be a bad idea no matter the economic outlook. Advertising drives consumer spending and is a necessary part of business operations. A tax on advertising will simply mean there is less advertising in the District, which will drag the local economy. The ad tax isn’t akin to the health club tax of a few years ago. Advertising is much more mobile and can be placed in media outlets in neighboring jurisdictions and target D.C. residents. This will disadvantage businesses located in the District.
It is not fair that businesses who are just a few miles away in Virginia or Maryland will not bear the same burden.
Councilmembers heard from independent publishers in the District who, like many business
owners, are paying from their own savings to keep their businesses afloat. When local
newspapers and websites are diminished or shuttered, the whole community suffers. Here’s
what could happen:
• News about the local happenings in the District will decrease. Coverage of the arts,
theatre, wards and the Council itself will decline because there will be fewer reporters
and publications available for coverage.
• Probono or discounted advertising for non-profits and community events will
diminish. Publications will not be able to afford to support those events in the way they
have in the past.
• Incidences of corruption could rise and the bond rating of the District could fall. A
recent study, profiled in the Columbia Journalism Review, noted that borrowing costs
rise and local government efficiencies become more pronounced because newspapers
are not fulfilling their traditional watchdog role.
Please do not vote to decimate your local news sources. We ask that you stand with local
media and repeal the advertising and personal information tax.