Music is special
May. 13th, 2006 09:51 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
pecuniumThe new tax bill has some interesting provisions, the one which jumps out at me is that being a musician is now a special category of artist.
See, the way it works now, if one creates a work of art and sells it, it's the same as if one did any other sort of manufacture. One gets taxed on it as income (this is for private people, corporations get taxed under a different set of rules).
So make a song, a scuplture, a painting, a photograph, a fine piece of furniture, and it's the same as if one was selling bread, bales of hay, belts, shoes, candles, fruit juice, cages for animals, you name it.
Which means that one might pay as 35 percent of one's income as federal tax.
But if Bush signs the present bill (I'm willing to cover large wagers on this one... I'll even give odds) music will no longer be listed among the things which are taxed as are labor and those lesser creations as are made by sculptors, painters, photographer, potters, writers and rest of the mob.
Nope, the sale of self-created musical works has become a capital gain, and as such is taxed at not more than 15 percent.
Painters... well you see, music is special, it's not the same. Writers, well all you do is sit around and think. Photographers... heck the picture is out there, anyone could have taken it. Sculptors... all you did was knock the extr bits off, or slap some clay together to make the mold.
But musicians.... they have to pull themes, and melody and harmony out of the air, and add words.
That's fine for guys who are selling songs, but it's a slap in the face to other artists. Opera singers, they get a wage, so they can pay 35 percent. Cover artists, they didn't sell the song, just perform it, so they get to pay the higher rate.
Which is part of the problem of the tax code. It's being tweaked to do things. Which means it gets tweaked by those who have the money to buy the access to influence the people who write the laws. That's a postivie feedback loop, and it means the rich get richer and the poor pay for it.
I'm not against tax cuts, but I do think we have to get the money we need to pay for things from somewhere (yes, debt can be useful, but as a way to get those things which are needed to set things up, it's not a way to keep things going. In time of need there are things which require infusions of money, and if the economy can't pay for it now, a bit of borrowing is in order; but if the economy is strong enough to pay for things, it ought to be pay as we go. Tax and spend has always made more sense than spend and borrow).
I also think that money ought to come from those most able to afford it. The guy making five-million dollars can more readily afford to have a large chunk of the money above, oh, let's say 1 million, taxed at 50 percent, than can the guy at the other end, bringing in 20,000 a year can afford to have all of it taxed at 20 percent.
There are other oddities in that pattern to (though again, this gets into what we want a tax code to do... it's unavoidable that what the effects of a tax structure are will affect how it's built, which in turn reflects on the society which builds the code, but I digress). The more tax there is on high income, the less companies pay in high income, and the more they spread the profits around in terms of overall salary (though the most recent models for that also had a strong union structure, which probably had something to do with the wages of the mass of Americans) and investments in things like plant upgrades and the like, because that was a way to use the money without paying taxes on it.
If one wants a sad (and I hope not as accurate as it looks from where I sit) take on this problem, one should read, "American Theocracy". It's about more than just the marriage of the radical religious section of the polity and the Republican Party, it's about how we run the country, and how we are financing it on a bubble of debt. There was a time when the business of America was making things, now it's moving money around. There have been nations which did that, Spain, Holland, England. The high-water marks for them came before they made money the engine of the economy.
Spain excluded, we seem to be doing it worse than they did (Spain had no production economy when it became suddenly rich, and it didn't build one with the money it had coming in, why bother with working, when a bit of speculation would make the meanest of peasants rich?).
So if I were building a tax code I'd look to seeing to it those who have the least money keep the most of it. Not only because they need it, but they need it because they have to spend it. No long term deposits of the extra money of the people at the poverty line. They don't have the etra money. Which pumps the economy.
But we can rest easy now. The guys who know better than I do have decided selling songs is a capital gain, and doesn't need to be taxed as highly as my mere income.
See, the way it works now, if one creates a work of art and sells it, it's the same as if one did any other sort of manufacture. One gets taxed on it as income (this is for private people, corporations get taxed under a different set of rules).
So make a song, a scuplture, a painting, a photograph, a fine piece of furniture, and it's the same as if one was selling bread, bales of hay, belts, shoes, candles, fruit juice, cages for animals, you name it.
Which means that one might pay as 35 percent of one's income as federal tax.
But if Bush signs the present bill (I'm willing to cover large wagers on this one... I'll even give odds) music will no longer be listed among the things which are taxed as are labor and those lesser creations as are made by sculptors, painters, photographer, potters, writers and rest of the mob.
Nope, the sale of self-created musical works has become a capital gain, and as such is taxed at not more than 15 percent.
Painters... well you see, music is special, it's not the same. Writers, well all you do is sit around and think. Photographers... heck the picture is out there, anyone could have taken it. Sculptors... all you did was knock the extr bits off, or slap some clay together to make the mold.
But musicians.... they have to pull themes, and melody and harmony out of the air, and add words.
That's fine for guys who are selling songs, but it's a slap in the face to other artists. Opera singers, they get a wage, so they can pay 35 percent. Cover artists, they didn't sell the song, just perform it, so they get to pay the higher rate.
Which is part of the problem of the tax code. It's being tweaked to do things. Which means it gets tweaked by those who have the money to buy the access to influence the people who write the laws. That's a postivie feedback loop, and it means the rich get richer and the poor pay for it.
I'm not against tax cuts, but I do think we have to get the money we need to pay for things from somewhere (yes, debt can be useful, but as a way to get those things which are needed to set things up, it's not a way to keep things going. In time of need there are things which require infusions of money, and if the economy can't pay for it now, a bit of borrowing is in order; but if the economy is strong enough to pay for things, it ought to be pay as we go. Tax and spend has always made more sense than spend and borrow).
I also think that money ought to come from those most able to afford it. The guy making five-million dollars can more readily afford to have a large chunk of the money above, oh, let's say 1 million, taxed at 50 percent, than can the guy at the other end, bringing in 20,000 a year can afford to have all of it taxed at 20 percent.
There are other oddities in that pattern to (though again, this gets into what we want a tax code to do... it's unavoidable that what the effects of a tax structure are will affect how it's built, which in turn reflects on the society which builds the code, but I digress). The more tax there is on high income, the less companies pay in high income, and the more they spread the profits around in terms of overall salary (though the most recent models for that also had a strong union structure, which probably had something to do with the wages of the mass of Americans) and investments in things like plant upgrades and the like, because that was a way to use the money without paying taxes on it.
If one wants a sad (and I hope not as accurate as it looks from where I sit) take on this problem, one should read, "American Theocracy". It's about more than just the marriage of the radical religious section of the polity and the Republican Party, it's about how we run the country, and how we are financing it on a bubble of debt. There was a time when the business of America was making things, now it's moving money around. There have been nations which did that, Spain, Holland, England. The high-water marks for them came before they made money the engine of the economy.
Spain excluded, we seem to be doing it worse than they did (Spain had no production economy when it became suddenly rich, and it didn't build one with the money it had coming in, why bother with working, when a bit of speculation would make the meanest of peasants rich?).
So if I were building a tax code I'd look to seeing to it those who have the least money keep the most of it. Not only because they need it, but they need it because they have to spend it. No long term deposits of the extra money of the people at the poverty line. They don't have the etra money. Which pumps the economy.
But we can rest easy now. The guys who know better than I do have decided selling songs is a capital gain, and doesn't need to be taxed as highly as my mere income.
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no subject
Date: 2006-05-13 06:18 pm (UTC)no subject
Date: 2006-05-13 06:36 pm (UTC)Now, instead of paying 35 percent on those royalties, he pays 15.
It's not about making sense, it's about someone getting to avoid paying taxes.
TK
no subject
Date: 2006-05-13 06:35 pm (UTC)no subject
Date: 2006-05-13 06:47 pm (UTC)The short answer is selling all of a business is different from selling rights to one picture. Looking at what the WaPo says, the sale of songs is now a capital gain.
Looking at what the IRS says the sale of photographs is not.
Property for sale to customers. A sale, exchange, or involuntary conversion of property held mainly for sale to customers is not a section 1231 transaction. If you will get back all, or nearly all, of your investment in the property by selling it rather than by using it up in your business, it is property held mainly for sale to customers.
Example.
You manufacture and sell steel cable, which you deliver on returnable reels that are depreciable property. Customers make deposits on the reels, which you refund if the reels are returned within a year. If they are not returned, you keep each deposit as the agreed-upon sales price. Most reels are returned within the 1-year period. You keep adequate records showing depreciation and other charges to the capitalized cost of the reels. Under these conditions, the reels are not property held for sale to customers in the ordinary course of your business. Any gain or loss resulting from their not being returned may be capital or ordinary, depending on your section 1231 transactions.
Copyrights. The sale of a copyright, a literary, musical, or artistic composition, or similar property is not a section 1231 transaction if your personal efforts created the property, or if you acquired the property in a way that entitled you to the basis of the previous owner whose personal efforts created it (for example, if you receive the property as a gift). The sale of such property results in ordinary income and generally is reported in Part II of Form 4797.
So selling all of Rockslide (or me selling off my photography business) would count as a capital gain (or loss) after depreciation.
But selling individual images, or rights to collections wouldn't.
Music is special.
TK
no subject
Date: 2006-05-13 07:20 pm (UTC)Strange to see Boxer and Hatch on the same cosponsor list. :)
no subject
Date: 2006-05-13 10:44 pm (UTC)no subject
Date: 2006-05-13 11:00 pm (UTC)I don't think making someone do work for hire would make the hiring agent an author in terms of this law, and so it would still go on the books as an aquaired property, and be subject to the normal tax laws.
Which are favorable enough (records rarely make much more profit than films do, Sony, RCA, Columbia and the like ought to be bankrupt so many times over as to make an airline look sound, just UA, MGM, Buena Vista and the like should be too. If you ever doubted there was magic in the movies, you never got to see the books).
TK
no subject
Date: 2006-05-14 04:33 am (UTC)On its face, most legislation looks good, beneficial, or necessary. The zinger tends to come in the details, application, and side-effects. Just on the basis of the Recording Industry's unsavory reputation for screwing the Artists, I'd be willing to bet ... oh... say ... a pint of good Ale than the Big Recording Companies end up profiting, one way or another, more from this than the Artists do. Not that I begrudge the Artists this benefit, mind you, or that I don't think it should be extended to cover all intellectual & artistic property income.
Maybe I'm being excessively pessimistic here (thought that's difficult, nowadays) -- perhaps the Legislator who slipped this bit in has an Important Constituent who has a grandchild with a Garage Band, or something like that -- but most of these last-minute, no-debate additions seem to be big-time Sleazy and in need of even more careful scrutiny than most laws.