It’s official. President Donald Trump signed the Tax Cuts and Jobs Act (which we’ll call the “Tax Jobs Law”) during an Oval Office ceremony this morning. Next stop, holiday in Florida.
With the corporate tax rate set to drop from 35% to 21%, the Tax Jobs Law has been hailed as a “middle-class miracle” by the GOP and various media companies, broadcasters, and Hollywood studios.
While speaking about the bill that became the Tax Jobs Law during an interview with NBC’s Today on Wednesday morning, House Speaker Paul Ryan reiterated his claim that American companies would use their soon-to-be fatter bottom lines to hire more workers.
“It’s not a question of if,” he said. “It’s a question of how much.”
But skeptics like former New York City mayor and billionaire Michael Bloomberg have called it an “economically indefensible blunder that will harm our future.”
“CEOs aren’t waiting on a tax cut to ‘jump-start the economy,’” he explained. “It’s pure fantasy to think that the tax bill will lead to significantly higher wages and growth, as Republicans have promised.”
While the Tax Jobs Law is clearly a win for corporations, it could spell significant financial trouble for “middle class” entertainment and advertising employees, including actors, writers, directors, producers and advertising creatives.
Entertainer taxes could triple
The Tax Jobs Law will increase taxes on certain jobs by nearly 300% in 2019, according to a new analysis by Actors’ Equity (the stage actor’s union) that was published in The Hollywood Reporter.
Industry leaders found little reason to cheer about the impending strain.
“These draconian changes are mean,” Equity secretary-treasurer Sandra Karas told Variety.
“They slap working people in the face … performers get the shaft.”
Karas, who has prepared thousands of returns for entertainers as a practicing tax attorney, calculated the Tax Jobs Law effect on the wages of four Actors’ Equity members. She determined that all of them would face tax increases ranging between 25% and 269%.
Form 2106 disappears
The Tax Jobs Law also eliminates Form 2016, which allows workers to deduct certain unreimbursed expenses such as home office, travel, and cell phone bills.
In many cases, fees paid by above-the-line and crew members — for agents and managers, union dues, and attorneys — will also no longer be deductible. In certain scenarios, these expenses can add up to nearly 20% of income.
Actors will be on the hook for training classes, travel to auditions, theater tickets, accountants, business managers, and items such as headshots, reels, websites and supplies.
According to Karas, these expenses can add up to as much as $7,000 per year, and that amount does not include the cost of out of town auditions.
All told, business expenses that take up to 20-35% of income will no longer be deductible.
After some debate, the new legislation does preserve the “Qualified Performing Artist” tax deduction, which allows deductions of advertising, travel, and agent and manager commissions. But the “above the line” specification is limited to those who make no more than $16,000 in adjusted gross income, a figure that has not been raised since 1986, the year of the last tax reform legislation.
SAG-AFTRA issued a statement regarding the impact of the QPA:
“We have repeatedly and regularly fought for improvements to the qualified performing artist (QPA) deductions section of the tax code in recent years. We argued that QPA should remain in the final bill proposal and it appears that it did. We will now continue our work to improve QPA, to make QPA more useful and accessible for more members.”
Loan-Outs and freelancers are unaffected
In a normal employment relationship, a movie or TV show hires the individual writer, actor or director, or a theater production likewise hires the individual actor or director (but not the playwright).
But in a loan-out arrangement, the individual “incorporates” by forming his or her own company, a “loan-out company,” that employs him or her and then “lends out” services to the movie, TV show or theater production. Loan-outs are also referred to as “S corporations.”
Big name actors, writers and directors are known to do this as do some advertising freelancers. They will benefit from the new tax law as their deductions will remain unaffected.
Writers Guild West issues statement
The Writers Guild was vehemently against the bill as many of its writers are everyday middle-class employees or jobseekers.
Yesterday, the organization issued a statement on its website:
“The tax bill is a disaster. The fundamental problem faced by America is that for 40 years our economy has become increasingly tilted toward inequality and the disappearance of the middle class.
Congress and the President have skewed the tax system heavily in favor of the rich; next they will use the resulting budget crisis to defund Medicare, public education and Social Security, all things that working Americans fought for and pay for.
Middle class writers are not immune to the forces of inequality. We will be doing our best to help writers understand the implications of this legislation for them. The WGAW stands with those who will resist.”
California and New York hit hardest
The effect of the new legislation will be especially pronounced in California and New York, where high state and local taxes will no longer pack the same punch when it comes to reducing the tax burden.
That’s because there will be a $10,000 cap on the amount that can be deducted.
Not only could it mean higher taxes for a number of households, but also, according to Variety, it could limit the the advantages of buying a home.
The Motion Picture Association of America (MPAA) has praised the Tax Jobs Law as a driver of economic growth and job creation. According to a rough analysis, their six member companies will save more than $5 billion under the lower rate, allowing greater competition with traditionally cheaper countries.
The tentacles of greed
Although the Tax Jobs Law devotes excruciating detail to corporations, it has produced some good news for workers. Earlier this week, spokespersons for AT&T and ComCast vowed to pay $1,000 bonuses to 200,000 and 100,00 employees, respectively, as soon as the bill became a law.
But it’s not all that.
According to Ly Weill at The Daily Beast, AT&T credited The Tax Jobs Law just to get something in return — in this case, it was most probably the DOJ’s go-ahead on a merger with Time-Warner — and “the big payout was to President Donald Trump’s ego.”
“AT&T was already in talks with its union to give holiday bonuses,” she writes. “The telecom’s GOP-friendly press release makes it the latest company to praise Trump’s legislative agenda when they need a big favor from the White House.”
In other news, AT&T laid off 700 workers across several states last week.
There are strings attached to ComCast’s generosity as well. The global conglomerate recently announced that it will raise monthly rates $1 to $5 on subscribers next year.
According to DMR statistical reporting, the company has over 47 million customers, the top end of the new prices can add up to a $235 million monthly bump in revenue.
ComCast and AT&T recently won the option to diversify and increase the costs of internet access after the FCC repealed Net Neutrality on Dec. 15.
Stay tuned to Reel Chicago for more analysis on the Tax Jobs Law, which takes effect January 1.
This story was updated Dec. 23 to include more detail about AT&T and ComCast. Thanks for the tip, Sean Graham-White.