Music to Songwriters' Ears: Lower Taxes
Sooo...I wonder if this would apply to all music composers if passed? I would argue that it would. Hmmm......
Story online here
Music to Songwriters' Ears: Lower Taxes
Country Artists' Group Presses Lawmakers to Slash the Levy on Lyricists
By BRODY MULLINS
Staff Reporter of THE WALL STREET JOURNAL
November 29, 2005; Page A4
WASHINGTON -- Country music is cool these days -- and now Congress may make it more profitable for the people behind the lyrics.
A bipartisan group of lawmakers, prodded by members of the country-music industry, added a provision to pending tax legislation that would lower taxes for writers of all kinds of songs. The lawmakers propose to change a section of U.S. tax law -- written before singer Garth Brooks was born -- that would tax songwriters' handiwork as capital gains rather than ordinary income as under current law.
"This is just such a glaring injustice," says Bart Herbison, executive director of the Nashville Songwriters Association International. The association, which represents about 30,000 songwriters, says members' average songwriting income of just $4,700 a year makes more advantageous tax treatment only fair.
The songwriters' provision in the tax bill would apply to the sales of all types of music, not just country songs. But the Nashville songwriters group has pushed for the change, rounding up support from lawmakers representing Southern states such as Tennessee and Kentucky, among others.
The songwriters' provision, which would cost the government about $4 million a year, according to the group, is one of several obscure tax changes included in a $70 billion, five-year tax bill that Congress hopes to approve this year. Other provisions in the bill would increase the penalties for bad checks, allow volunteers at charities to expense their mileage and allow nonmilitary intelligence officers to skip paying capital-gains taxes after selling their houses.
At issue for the songwriters is a 1950s-vintage tax provision that requires makers of creative works -- such as painters, novelists 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.
Those tax rates make a big difference because the royalties songwriters otherwise receive for their work are relatively modest. A songwriter makes 8.5 cents each time his or her lyrics are sold on a CD, the association says, and even less when the songs are played on the radio. The new provision would apply only to sales of "song catalogs" -- collections of a writer's work -- and not to ordinary royalty income from individual songs.
Songwriters face another hurdle, according to the association, because they must be paid royalties immediately after they are collected. Thus, unlike an author of a novel, who could arrange to spread out his or her payments over a number of years, a songwriter is more vulnerable to fewer, large payouts -- and more of a tax hit.
Five years ago, for instance, Liz Hengber, the author of Reba McEntire hits "And Still," "It's Your Call," and "Forever Love," sold her catalog of 200 songs for an amount in the mid-six-figure range -- but paid more than $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," Ms. Hengber says. "When the hits do come, we have to be like squirrels and bury the money."
The Nashville songwriters association doesn't have paid Washington lobbyists, doesn't make political donations and doesn't take lawmakers on trips around the country. But Mr. Herbison has built support by organizing more than 400 Capitol Hill visits to Washington during the past four years for songwriters such as Ms. Hengber to make their case to every member of the tax-writing committees in the House and Senate.
"We bring songwriters up there with a guitar and a story to tell," says Bob Regan, the volunteer president of the songwriters association and a professional songwriter. He estimates that he spent nearly three weeks in Washington this year talking to lawmakers.
Mr. Regan, who says he got into songwriting because he "likes playing in bars and sleeping in late," is the author of 800 songs. Ten of his songs have become hits, such as "Busy Man" by Billy Ray Cyrus, "Thinkin' About You" by Trisha Yearwood and "Til Love Comes Again" by Ms. McEntire. When Mr. Regan sold his catalog of songs in 2000 for a figure in the high six-digits, he paid 39% in taxes.
A few years ago, the songwriters association helped start a Songwriting Caucus in the House headed by Rep. Marsha Blackburn (R., Tenn.) and Rep. Lloyd Doggett (D., Texas). This year, Sen. Lamar Alexander (R., Tenn.) and Sen. Mary Landrieu (D., La.) founded a similar caucus in the Senate.
The lawmakers introduced legislation in the House and Senate that would treat songwriters' sales as capital gains rather than ordinary income. Rep. Ron Lewis (R., Ky.), a country-music fan and guitarist, added the provision to the pending tax bill during a committee vote. The provision isn't in the Senate version of the bill, but backers are aiming to preserve it in final House-Senate negotiations.
"This is a business issue," says Ms. Blackburn, who represents a district outside Nashville. "The chances are very good for this staying in the final bill."
One songwriter lobbying Congress to include the measure in the final bill is Debi Cochran, who won an Emmy for her song that was played on the soap opera "General Hospital." She also is the author of the No. 1 hit "My Kind of Girl," performed by Collin Raye.
In all, Ms. Cochran has a collection of 300 songs that she refuses to sell because tax rates are too high. To make ends meet, she sells handbags at a Dillard's department store.
"I have thought about bringing the Emmy to D.C. with me, and wearing my name tag from my day job at the department store," Ms. Cochran says. " 'This is how good I am,' I would say in my meetings, pointing to the statue. 'And this is what I do for a living,' I would say, touching my Dillard's badge.' "