University of Southern California

Public Policy & Funding the News

A Project of the USC Annenberg Center on Communication Leadership & Policy

State and Federal Tax Breaks

tax_policy.jpg

Also likely to decline are some of the tax breaks given to news publishers, particularly those tied to sales and use tax breaks for newsprint, ink and other print-related expenses that are becoming a smaller part of the publishing business. All told, federal and state tax laws forgive more than $900 million annually in taxes related to newspapers and magazines. Print publications received about $150 million in federal tax breaks in the 2008 fiscal year - favorable rules for expensing circulation expenditures (worth about $100 million) and special treatment of magazine returns (worth about $50 million).

Most of the money from tax breaks comes at the state level. An analysis of tax data published in 37 of the 50 states showed that newspapers and magazines received state tax breaks of nearly $800 million in 2008.The largest amount, $625 million, is for a tax exemption on the sales of newspapers and magazines, and in some states from the sale of advertising services.The other tax break, totaling $165 million annually, comes from exempting sales and use taxes on newsprint, ink, machinery and related manufacturing equipment. Eleven 10 Public Policy and Funding the News states did not report or tabulate industry-specific data, so the actual total of state tax breaks for newspapers and magazines could well exceed $1 billion annually. Some of these tax breaks are more valuable to the news business than others. For example, only a portion of the tax exemption on newspaper and magazine sales represents a monetary benefit. However, these tax preferences still provide a tangible subsidy, and all result in revenue losses for the government.

Federal and state tax laws forgive more than $900 million annually in taxes related to newspapers and magazines. Print publications received about $150 million in federal tax breaks in the 2008 fiscal year.

At least one state has recently taken action to increase its tax subsidies to newspapers. In 2009, with one of its largest newspapers (the Seattle Post-Intelligencer) about to cease publication, Washington state enacted a $1.3 million tax break for the state's newspapers. Gov. Christine Gregoire, signing the legislation, acknowledged that it amounted to a token subsidy for a statewide industry with hundreds of millions in revenue. "The industry has to right itself, and government can't and won't be a part of it righting itself," she told the Associated Press. "But I don't want government to be part of the reason that this industry can't make it." David Zeeck, publisher of the News Tribune of Tacoma, said the legislation would save his newspaper about $100,000 - enough to save the jobs of two reporters.

The cumulative effect of reduced government support is not the primary problem afflicting news businesses today. Newspapers alone have lost more than $20 billion in revenue in the last three years; at most the reduction in government assistance amounts to a few billion dollars. Yet this funding provides building blocks for economic survival, and the cutbacks land harder on some than others. Small businesses have been particular targets. Reductions in postal subsidies and, prospectively, public notices fall particularly hard on weekly newspapers and small magazines.

Further, they raise this question for policymakers: If two centuries of government assistance for the news business are disappearing, and disappearing at a particularly difficult time for publishers, are there steps government should now take to make certain democracy's information needs continue to be met?

Contact

Center on Communication Leadership & Policy
350 S. Grand Ave, Suite 3350
Los Angeles, CA 90071-3431
(213) 337-3100
commlead@usc.edu