The New Excise Tax Frontier: Hollywood

To conservatives like me, the following proposal for raising taxes on Hollywood celebrities goes against my DNA.  However, two facts are indisputable:  (1) Hollywood is perhaps Obama's biggest booster club, giving him donations in kind and in dollars, and (2) Congress' stated goal is to raise taxes on the wealthy, although they will actually raise them on everyone.  Therefore, with a bit of irony in mind, I propose the following for debate. 

 

After listening to Democrats argue that the wealthy aren’t paying their fair share of taxes, it’s time for Americans to take an empirical view of the massive wealth accumulated by Hollywood celebrities at the expense of their fans, and at a great loss to the government coffers.

Since large numbers of celebrities are Democrats and they cheerfully endorse Barack Obama’s tax policies, shouldn’t it be incumbent upon them to lead by example?  With this idea in mind, and in the spirit of patriotic bipartisanship, we should push Congress to levy special taxes on the giant honey pots in Hollywood, New York, and elsewhere.   The fiscal cliff is looming, so our government needs to devise many ways to satisfy our legislators’ unquenchable thirst to tax and spend.  

As the table below of extraordinary net worth reveals, one could argue that celebrities must be picking our pockets every time we enter a theater or purchase music and videos.  

If celebrities are so proud of the wealth they have accumulated at our expense, and at the same time believe only they are champions of the poor, then they should be willing to share their wealth with others.   This is especially true because their redistributionist hero, President Barack Obama, claims they didn’t build their success with their hard work and talent alone.

Following Obama’s lead, the question we should ask is, how much is too much for celebrities to earn?  Obama believes that “at a certain point, you’ve made enough money,” so shouldn’t celebrities be held to a fairer maximum salary, like the one Obama suggests for other industries?  Celebrities may party with Obama, but an exception for them wouldn’t be fair to the rest of us.   Surprisingly, Roseanne Barr believes that no one should be allowed to earn more than $100 million.   As a celebrity who should exemplify self-loathing, Michael Moore hates the capitalist system, yet he proudly rakes in the money.

Let’s put the issue of wealth into perspective by comparing the net worth of celebrities versus a few national political figures.   Why should celebrities be wealthier than the supposedly smartest people in government, such as Vice President Joe Biden, U.S. Treasury Secretary Timothy Geithner, and Ben Bernanke, Chairman of the Federal Reserve?  These gentlemen are working very hard to control the entire U.S. economy.  

It is embarrassing that after 40 years in government, Biden’s net worth is only $500,000, while Geithner and Bernanke are slightly better with a net worth of $2 million each.   In Hollywood, $2 million is chump change, and $500,000 is pocket lint.   Regardless of the immense brainpower and responsibilities of these bureaucrats, celebrities have been far more successful at improving their personal net worth.   In a redistributionist scheme, this simply isn’t right.  

The only fair way to balance the scales of financial justice between celebrities, the bureaucrats, and tax-paying citizens is to levy a Federal excise tax on the entertainment industry.   Furthermore, we can tax them with a clear conscious, because the industry is said to be “depression proof.”

In The Sky is Rising!, a 2012 report by TechDirt, we learn:

Despite economic recessions, the movie industry generally continues to attract sizable audiences to theaters -- and the business has been called “depression proof,” owing to the fact that, even during the depths of the Great Depression, movie-goers numbered between 60 and 80 million Americans per week (when the US population was about 122 million).  

Also:

According to PwC reports that include movie revenues beyond just box office ticket sales, the film industry has grown worldwide by almost 6% over the five-year period from 2005 to 2010, exceeding approximately $82 billion in value.   For an industry that claims to be plagued by piracy, this steadfast level of growth during the Great Recession appears to justify the boastful statements of being recession proof.

Let’s not forget about the adult film industry, which TechDirt estimates to be valued at $4 billion.   This is a medium that is ripe for extra-special taxation.

As for the music industry, the same report says:

On the consumption side, music is also being consumed at near record-setting levels.   According to Nielsen SoundScan figures, the overall sale of music (including albums, singles, digital tracks, etc) exceeded 1.5 billion transactions in 2010 . . . These overall sales figures seem to rise and fall a bit over the years, but they don’t necessarily drop during economic recessions.

Live music also brings in huge amounts of money to celebrity performers:

From 1999 to 2009, concert ticket sales in the US tripled from $1.5 billion to $4.6 billion, according to Pollstar.   Ticket prices and merchandise become major sources of income for many popular rock stars like Lady Gaga, Madonna, Bruce Springsteen and for bands like U2.

Apparently, “many fans will do (or pay) almost anything to see them.” 

If all these findings are accurate, then it’s time for us to lobby our congressmen, demanding a 25% excise tax on all entertainment productions.   This was done in the 1950s, with fascinating results.  

We currently pay Federal excise taxes on gas, alcohol, tanning services, and will soon pay an excise tax on medical devices, so we should reinstitute an excise tax on all areas of the entertainment industry since the industry players are wallowing in money.  Similar proposals were suggested by John Nolte and Glenn Reynolds.  

In the 1950s the excise tax was 20%; today it should be higher to account for inflation.  Furthermore, the tax should be levied on gross proceeds for all ticketed television programming events, concert tickets, movie theater tickets, movies on demand, and for good measure, music and video sales in every medium.  

In addition to Federal excise taxes on proceeds, individual celebrities should be taxed at a marginal tax rate of 91%, which according to economist Paul Krugman, also happened in the 1950s.   Just imagine the sort of revenues that would be raised to support government spending!  Celebrities would learn a lesson about the constructive and destructive nature of capitalism.

Furthermore, we should lobby our State legislators to eliminate tax credits for the movie and television industry.  If the Democrats believe that oil and gas exploration companies don’t need tax credits, then I argue that neither does the extremely wealthy entertainment industry.

Here are some examples of State tax credits benefiting the entertainment world:

New York:  Moviemakers get a 30% fully refundable tax credit on qualified expenses, as well as some sale tax exemptions and up to 5% tax credit on investment in construction and/or upgrades to facilities.  

District of Columbia:  No funding yet, but they would like to give a 42% rebate on direct production expenditures subject to D.C. tax, or a 21% rebate on expenditures not subject to D.C. taxes, as well as a 30% rebate on qualified payroll expenditures.  

California:   Offers a tax credit of 20% or 25% against income and/or sales and use taxes, based on qualified expenditures.

Florida:  Production incentives include a cash rebate program on in-state expenditures.  There are 4 queues: 1) films, TV, commercials, or music videos with expenditures in excess of $650,000 receive a 15%-22% rebate: 2) multiple commercials or music videos with minimum combined expenditures of $500,000 and a $100,000 per project minimum receive a 15%-20% rebate; 3) indies spending $100,000-$625,000 receive a 15%-17% rebate; and 4) digital media projects receive a 10% rebate.

The great clarion call of this century is to bring down the deficit in a balanced way.    Removing unnecessary State tax credits would be one small way to help.   Federal excise taxes, however, would be the ultimate revenge against an industry that voted for Obama.  And the high marginal tax rate would be icing on the cake.

The Daily Kos argues that “trillions and trillions of dollars [are] sitting on the sideline.” Certainly billions of dollars are sitting in the bank accounts and assets of celebrities -- the ultimate one per centers that populate a cult of personalities.  

So, if you think the entertainment industry should pay a heavy price for supporting the tax and spend policies of this Administration, then I urge you to contact your Federal and State legislators.

Frankly, it would be entertaining to watch celebrities go into paroxysms of rage if legislators actually debated the ideas presented here.  If that happens, Democrat celebrities will sing a different song about fairness.

 

Name	Net Worth	As of
Ben Affleck	$65 million	1/24/10
Alec Baldwin	$64 million	11/26/10
Elizabeth Banks	$16.5 million	1/15/11
Roseanne Barr	$80 million	9/3/10
Joy Behar	$8 million	10/11/20
Beyonce	$300 million	1026/11
Birdman	$130 million	1/3/11
Jimmy Buffett	$400 million	6/8/10
Mariah Carey	$500 million	5/29/10
Jim Carrey	$150 million	1/8/10
Cher	$305 million	1/7/11
George Clooney	$160 million	1/8/11
Sean “Diddy” Combs	$475 million	7/16/11
Common	$35 million	1/17/11
Russell Crowe	$65 million	7/29/10
Sheryl Crowe	$40 million	6/5/10
Tom Cruise	$250 million	12/24/09
Matt Damon	$65 million	2/26/10
Johnny Depp	$350 million	1/7/11
Ellen DeGeneres	$105 million	10/1210
Leonardo DiCaprio	$200 million	11/14/10
Cameron Diaz	$75 million	12/27/09
Dr. Dre	$260 million	10/31/10
Lena Dunham	$4.5 million	9/27/12
Jimmy Fallon	$16 million	8/30/10
Will Ferrell	$80 million	3/28/10
Jane Fonda	$120 million	1/24/11
50 Cent	$250 million	9/13/10
Harrison Ford	$200 million	5/29/10
Janeane Garofalo	$10 million	1/26/11
Adrian Grenier	$15 million	7/23/10
Ricky Gervais	$80 million	1/17/11
Danny Glover	$15 million	11/11/10
Melanie Griffith	$20 million	8/20/10
Morgan Freeman	$90 million	7/7/10
David Geffen	$5.5 billion	1/28/11
Whoopie Goldberg	$45 million	8/30/10
Kathy Griffin	$15 million	7/14/10
Jon Hamm	$15 million	3/8/11
Tom Hanks	$350 million	12/30/10
Daryl Hannah	$15 million	12/5/10
Kevin Hart	$9 million	6/9/11
Jay-Z	$475 million	12/21/10
Angelina Jolie	$120 million	11/25/10
Ashley Judd	$22 million	7/29/10
Ashton Kutcher	$140 million	11/20/10
Lady Gaga	$150 million	1/23/10
Keira Knightley	$50 million	11/26/10
Spike Lee	$40 million	7/8/10
Jay Leno	$250 million	12/20/10
David Letterman	$400 million	9/1/10
Justin Long	$15 million	7/4/10
Eva Longoria	$35 million	8/17/10
George Lucas	$7.3 billion	3/223/10
Madonna	$650 million	11/26/10
Bill Maher	$23 million	6/1/10
Paul McCartney	$800 million	10/1/10
Demi Moore	$150 million	11/20/10
Michael Moore	$50 million	11/18/10
Olivia Munn	$5 million	1/16/11
Rosie O’Donnell	$100 million	9/12/10
Gwyneth Paltrow	$40 million	7/27/10
Sarah Jessica Parker	$90 million	8/30/10
Sean Penn	$120 million	12/4/09
Brad Pitt	$180 million	9/17/10
Julia Roberts	$140 million	12/9/9
Chris Rock	$70 million	7/6/10
Adam Sandler	$300 million	9/11/10
Susan Sarandon	$50 million	1/19/11
Sherri Shepherd	$10 million	1/8/11
Will Smith	$200 million	12/2/09
Snoop Dog	$110 million	12/30/09
Steven Spielberg	$3 billion	8/24/10
Bruce Springsteen	$200 million	5/12/10
Justin Timberlake	$70 million	5/2/10
Barbara Streisand	$340 million	1/19/11
Jon Stewart	$80 million	9/30/10
John Travolta	$200 million	2/14/11
Ted Turner	$2.0 billion	9/9/10
Gabriel Union	$12 million	10/24/10
Barbara Walters	$150 million	1/17/10
Kanye West	$90 million	12/24/10
Will.I.am	$75 million	8/13/10
Brian Williams	$30 million	3/1/11
Forest Whitaker	$15 million	7/14/10
Oprah Winfrey	$2.7 billion	1/4/11