(CelebrityAccess MediaWire) — A bipartisan group of lawmakers in Congress have been prodded by the country-music industry to make songwriting a more profitable industry by cutting back on the taxes.
The lawmakers added a provision to pending tax legislation that would lower taxes for writers of all genres of music. The provision would change an old section of U.S. law that would tax songwriters’ work as capital gains rather than ordinary income as under current law.
“This is just such a glaring injustice,” Bart Herbison, executive director of the Nashville Songwriters Association International, told the Wall Street Journal. The association, which represents over 30,000 songwriters, told the paper that members’ average songwriting income of just $4,700 per year makes more advantageous tax treatment only fair.
The songwriters’ provision would cost the government about $4 million per year, according to the group.
The WSJ explains that at issue for songwriters is a 1950s tax provision that requires makers of creative works, such as painters, writers and songwriters, to pay regular income taxes on sales of their work. Since songwriters tend to be self-employed, they wind up paying up to 35% in income taxes on the sales and more in self-employment taxes, rather than the lower 15% capital gains tax rate paid by those who sell capital assets such as stocks.
As the royalties made by songwriters are relatively modest, the tax rates make a big difference. The provision will apply to collections of the writer’s work, and not to ordinary royalty income from individual songs.
Songwriters still face another hurdle, the association told the WSJ, because they must be paid royalties immediately after they are collected, and therefore cannot spread out their payments over a number of years, taking a larger tax hit than necessary.
Liz Hengber, who wrote a string of hits for Reba McEntire, sold her entire catalog in the mid-six-figure range, and wound up paying over $100,000 in taxes.
“It sounds like a lot of money, but I haven’t had a hit since 2000 so that money has to last me,” Hengber told the paper. “When the hits do come, we have to be like squirrels and bury the money.” –by CelebrityAccess Staff Writers