Once upon a time, Capitol Hill was teeming with newspapermen looking for the obvious and hidden, so they could inform the American people. Today, the press is still spending plenty of time in Washington -- but for a much different reason. An industry representative sought tax breaks for the newspaper industry on Thursday, citing difficult market conditions and company pension obligations.
John Sturm, president and CEO of the Newspaper Association of America, was clear when he approached Congress -- the newspaper industry was not interested in a subsidy. This is probably because a bailout request was already denied this year. Rather, Sturm said, the industry is looking for a tax break that would allow newspaper companies to get back taxes they paid on profits over the past decade to offset current losses, according to an Associated Press report. The newspaper companies also want permission to spread out their contributions to employee pension plans.
The newspaper industry's decimation has been well-documented since ... well ... before the industry itself knew it was in trouble. Ads are down, circulation is down, and there seems to be no relief in sight. No attempt to right the situation appears to have worked.
Yet, despite the fact that the business model's time appears to have passed, it still contributes a substantial number of jobs to the U.S. economy, which is the leverage point Sturm chose to use, telling Congress' Joint Economic Committee, "Newspapers need cash now to preserve jobs next year." From June 2008 to June 2009, the Bureau of Labor Statistics puts the number of newspaper jobs lost at close to 50,000, which drops the industry's total number by 15 percent.
To protect all these jobs, however, Sturm suggests that a direct financial infusion from the government wouldn't be a good idea, since the industry's "core mission is news gathering, analysis and dissemination often involving that very same government." Apparently, Sturm doesn't see an industry-specific tax break as generating the same conflict of interest, even though it only benefits the newspaper industry and has the effect of a capital infusion.
Under his proposal, current losses could be used to offset profits accumulated over the past five years, effectively leading to retroactive tax refunds. This approach extends the current law, which allows losses to be carried back two years. Unfortunately, many newspaper haven't made profits over this period.
The plan provides some interim relief, but it does not address the problems that have landed the newspaper industry in its current situation. While it buys more time for print publishers, the fact that they waited so long to address the challenges of free news suggests that a few years of more favorable market conditions (compared to the online-only players) will not yield a change in fortune for them.
This is the third time in 2009 that the newspaper industry has gone to Capitol Hill in the hopes of securing some sort of government support. Early in the year, there was talk of individual and larger-scale bailouts in Congress, but it did not come to fruition. Additionally, Dallas Morning News publisher James Moroney testified before Congress in May that Amazon (AMZN) was offering only brutal terms for newspaper access to the Kindle, indicating that publishing to the e-reader won't save the newspaper industry.
Rep. Carolyn Maloney, chairwoman of the Joint Economic Committee, raised the idea of converting newspapers to nonprofit entities, which would make their revenues tax exempt and donations to them tax-deductible. This form of tax relief, Sturm believes, may work in certain situations, but he doesn't see it as a broad solution to the industry's problems.
Sturm's organization represents such for-profit enterprises as the New York Times Company (NYT), Washington Post Company (WPO) and News Corp (NWS), which are publicly traded and, in theory, could provide income to their shareholders.
The slide continues, with newspapers seeking answers to their current crisis everywhere but in their own offices – again.