Tax Analysts Blog

Tax Tricks to Save Newspapers

Posted on Apr 28, 2009

The plight of America's newspapers is not exactly news. In recent years (and especially over the past 18 months or so), there has been plenty of hand-wringing about the dismal prospects of ink-on-paper publications. And not without reason. Ad revenues are plummeting, subscribers are vanishing, and more than a few newspapers have already closed up shop.

Sympathetic observers have offered a number of remedies. Eric Alterman, a media critic who writes frequently for The Nation, has suggested that newspapers might reorganize as nonprofits. Sen. Benjamin L. Cardin, D-Md., has proposed legislation to facilitate that sort of transformation.

Cardin wants to make subscription and advertising revenue tax exempt. Which might help, I suppose -- as long as these papers have revenue (and profits) in the first place. However, many newspapers are bleeding red ink. Presumably, they aren't paying a whole lot of taxes in the first place. Cardin acknowledged as much when announcing his bill:

    Because newspaper profits have been falling in recent years, no substantial loss of federal revenue is expected.
Of course, nonprofit status would also allow newspapers to solicit and receive tax-deductible contributions from a grateful public. But of course, that's the same public that keeps canceling subscriptions, right? I'm not convinced the NPR model is viable on a wholesale level.

A second, more interesting idea, however, has surfaced in the pages of The Nation. In an article in the April 6 issue, John Nichols and Robert W. McChesney outlined a stimulus program for American journalism.
    Just as there came a moment when policy-makers recognized the necessity of investing tax dollars to create a public education system to teach our children, so a moment has arrived at which we must recognize the need to invest tax dollars to create and maintain news gathering, reporting and writing with the purpose of informing all our citizens.
Strong words, followed by a strong recommendation: "Let's give all Americans an annual tax credit for the first $200 they spend on daily newspapers."

This subsidy would come with all sorts of strings. Papers would have to publish five days a week and reserve at least half their column inches for news coverage, for instance. But such a plan would at least "buy time" for struggling papers. And it might do so without giving politicians editorial control.

    the government will pay for every citizen who so desires to get a free daily newspaper subscription, but the taxpayer gets to pick the newspaper--this is an indirect subsidy, because the government does not control who gets the money.
Tax experts are sure to hate this idea: It clutters up the tax system, hides spending in the form of a tax cut, and opens the door to an endless stream of supplicants. Newspapers today, but why not magazines, book publishers, and network news shows tomorrow?

All valid complaints. But still...

Now is not the time to get fussy about good tax policy. Tax incentives are a fact of political life, and they are very popular with Democrats. Rather than rejecting them out of hand, tax experts need to evaluate each one on its merits. And this one has several.

The plight of modern journalism is real, acute, and unique. Most industries aren't burdened with the sort of public trust that newspapers have inherited. On the one hand, that trust has given papers extraordinary freedom (and profit) in years past. But nowadays, that trust has also imposed a financial burden on media companies that they simply can't (and won't) endure.

The old business models are dead. And until newspapers can find something to replace (or resurrect) them, we need a stopgap.

This tax credit may not be the perfect solution. But it does manifest a certain elegance. It gets money from public coffers to private payrolls while largely dodging the prospect of government interference in the operation of a free press. And it should appeal to both liberals (because they like the non-Fox mass media, even as they complain about it ceaselessly) and conservatives (because the whole plan sounds more than a little like school vouchers).

What's not to like?

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