December 05, 2023
The Washington Post ran a lengthy article about how Ava DuVernay is having her latest film financed by the Ford Foundation, as well as foundations supported by Melinda French Gates and Lauren Jobs. The piece describes the film, and notes how this can be a new model for financing artistic films that for-profit studios may not support:
“It’s a patronage model reminiscent of the charity bestowed on art museums or opera companies — high-cultural institutions that couldn’t survive without deep-pocketed benefactors.”
However, an important fact that did not get mentioned in the Post’s piece is that the charitable contributions made by the rich people who finance these foundations involve a large taxpayer subsidy.
While the size of the charitable contribution tax deduction has varied, depending on the tax rates at the time on incomes and estates, it has been roughly 40 percent. This means that taxpayers are picking up the tab for 40 cents of every dollar that these rich people choose to contribute to support Ms. DuVernay’s film. (To be clear, this is not at all a criticism of her new film. She is an accomplished filmmaker, and from the write-up in the article, it sounds like a very worthwhile project.)
The fact that the “patronage model” involves a large element of taxpayer subsidy seems an important point that might have been worth noting. While many of us may think it is a good idea for the government to support creative work and creative workers, we might not think that it’s best that the rich be the ones who decide which work deserves the taxpayers’ support.
A Democratic Alternative to the “Patronage” Model
Under the current system, the rich get the vast majority of the benefits from the charitable contribution tax deduction. This is both because they are taxed at a higher rate, so that $1 off of their taxable income saves them more money than $1 off the taxable income of a moderate or middle-income person, and also because the rich are far more likely to itemize their tax deductions.
Only 11.4 percent of taxpayers itemize their deductions, most of whom are at the top end of the income distribution. The overwhelming majority of taxpayers use the standard deduction. For them, the charitable contribution tax deduction is of no value whatsoever.
However, we could redesign this structure to make the benefits more evenly spread by changing the tax deduction to a credit. And, if we think it is important for the government to subsidize creative work, we could designate that this credit be used to support creative work.
The way this could work is that we would give every adult a credit of some size (say $100 to $200), which would be used to support the creative worker or organization that supports creative work, of their choosing. If we assume that every adult in the country could use their credit, this comes to between $25 billion and $50 billion a year, which would be a good chunk of change to support creative work.[1]
To be eligible to receive money through this system, a person or organization would register with the I.R.S., or a new agency, indicating what creative work they did. This registration would be similar to what non-profits do now to get tax-exempt status from the I.R.S.
They must say what they do that qualifies them for tax-exempt status; are they a church, a charity that provides food to the poor, or a think tank? The I.R.S. doesn’t make an effort to determine whether they are a good church, charity, or think tank, they just determine whether they do what they claim and if that would qualify them for tax-exempt status.
The same would be the case for individuals or organizations that register to be eligible for the creative work tax credit. They would indicate they are a writer, a movie producer, a singer, etc. Alternatively, an organization could register saying that they support blues musicians, mystery writers, or historical movies.
A condition of getting the money could be that the recipients are not eligible for copyright protection for a substantial period of time, say three to five years. The logic here is that the government gives people one subsidy for their work, not two. Copyright monopolies are one mechanism the government uses to support creative work. There is no reason that it should give people who benefit from this mechanism an additional subsidy in the form of money from a tax credit.
There is also the issue that the point of the credit is to support creative work for people to enjoy. If the work produced with the credit is paywalled and comes with a high price tag, not many people will see it. By contrast, if any work supported through this system is freely available over the web, it should attract the widest possible audience.
This copyright provision also has the benefit that it is largely self-enforcing. If someone who was getting money through the system tries to get a copyright during the period in which they are ineligible for copyright protection, their copyright is simply unenforceable. If a false copyright claimant attempts to bring a suit for copyright violation against someone, the person simply points out that the claimant was in the tax credit system and therefore their copyright is not valid.
The system for taxpayers using the credit would be similar to what is now in place for the charitable deduction. They could just indicate on their tax return that they had paid a certain amount to a qualified person or organization, with the understanding that they could be later asked for evidence that they had made this contribution.
Also, since the plan would be that everyone would have access to the credit, even if they did not pay income taxes, the system could be designed so that the government makes this payment directly on the taxpayer’s behalf. This would mean that they could fill out a form indicating which creative workers or organizations they wanted to support, and the government would make the payment.[2]
There obviously are many details that would need to be worked out in designing this sort of system, and there will undoubtedly be problems, but that is true with any system, including the current charitable contribution deduction. We could design the system to prevent obvious scams, for example, requiring that people get at least $3,000 in credit money, in order to be able to collect anything through the system, would prevent any sort of simple trading of credits. The key point is that we could design a government-funded system for supporting creative work that does not rely on the whims of the rich, as is now the case.
Journalism, a Special Case
The collapse of newspapers over the last quarter century, and especially local newspapers, has created interest in devising a system whereby the government supports this vital service. There have been various routes proposed, but there are efforts in at least two cities, Washington and Seattle, that have proposed this sort of individual credit or voucher system.
If one of these cities can get a news voucher system up and running, it would both do much to revitalize journalism in their community, and also provide a model for a more democratic system of taxpayer funding for creative work. The fact is, we do not need rich people to decide which creative work the government should support.
We should have a broader discussion on how taxpayer funding for the arts should be used. That would require some clearer thinking on this topic than what we see in public discussions today. It might also require some new ideas. We know the old saying that intellectuals have a hard time dealing with new ideas, but we need to have the discussion anyhow.
[1] I outline this sort of system in my book Rigged (it’s free).
[2] This route of direct payments might be preferable in a start-up phase where participation could be low. Suppose the credit was set at $100 a person, with the idea that if 250 million people took advantage of the credit, $25 billion would be paid out to creative workers. If the payments were made through a centralized system, and just a small number – say 25 million people – opted to use the credit, then the value of the credit could just be increased by a factor of ten. This would mean that each person who used their credit would effectively be contributing $1,000 to the creative workers/organizations of their choice.
The fact that the credits were initially far more valuable than originally intended should provide people with a strong incentive to participate in future years. In any case, this system would ensure that a substantial pot of money was available to support creative work.
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