Hollywood Loves Higher Taxes
by Melanie GrahamI just had the same conversation with a friend that I’ve had hundreds of times with my Hollywood Lefty pals – Higher taxes? No problem! I won’t be affected! I’m incorporated! It’s the hypocritical secret here – the lefty actors and writers all incorporate themselves to avoid higher taxes but expect everyone in Rube State America to pony up.
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33 Comments
Hey Melanie,
Good job to you and everyone at Big Hollywood. Seeing this kind of site and knowing that someone….anyone, in the entertainment business is conservative and trying to spread those views is very encouraging. Anyway, maybe now that conservatives are starting to voice opinions as a media presence more people will catch on and we can get the government back to the small limited entity it is supposed to be, and then we can eliminate the just ludicrous number of taxes that have burdened the people of this country. The federal government has gone WAY beyond what the founders intended and it’s about time that someone starts speaking up.
-Joe
How exactly does that work?
Presumably, they’re not incorporating as C corporations, which are taxed twice under the Internal Revenue Code (once at the corporate level, and again when shareholders are taxed on earnings distributed to them). S corporations and LLCs would be treated as flow-through or disregarded entitites, so income would be presumably be taxed once at the individual level–which should result in the same tax consequences as not incorporating in the first place.
And all of this assumes that the IRS won’t succeed in attacking these corporations as lacking economic substance or some similar line of reasoning.
I don’t think it’s particularly unlikely for a leftist actor to support higher taxes and think that they can avoid those same higher taxes by incorporation, because well, they’re pretty dumb. What I don’t understand is how you actually avoid higher income taxes by incorporating.
At least Obama is going to give me a $1000, because I’m in the working class.
I’m not an accountant or tax lawyer so this one confuses me. Exactly how does the tax code favor incorporation over sole proprietorship? Reasonable and necessary business expenses don’t depend on the tax paying entity for their characterization and a pass through entity, like an LLC or Subchapter S corp, only avoids a double taxation problem that doesn’t exist without bringing a second entity into the picture. I’ve occasionally heard people claim tax benefits will accrue to those who incorporate, but nobody has been able to explain how that works.Not that this has any bearing on the casual hypocrisy of the Left, but it does raise questions about their information and whether some could be swayed on the merits.
Ummmm how does a rube stater incorporate him/herself?
KB –
“At least Obama is going to give me a $1000, because I’m in the working class.”
As long as you make no more than 42,000 per year, you are the working class.
Melanie,
Don’t forget the fact that they own a California home which they live in the majority of the time, but then own a home in a state with no state income taxes like Texas, Wyoming, etc and claim that as their main residence. They then give big bucks to the liberal California legislatures to push the agenda of the left. They indulge themselves at the California politics buffet and the rest of us are forced to pick up the tab.
Don’tcha know, it’a always easier to be liberal with someone else’s money…My sister in law, is what I call a “screaming liberal”. She works for the Fla legislature, her husband is (once again) an assistant atty general (had higher post, but was demoted by new Atty Gen after election). She firmly believes that NO ONE should make more than $90k per year (except for them of course…they have better things to do with their money). Her explanation is that they can better direct their money than the government possibly could…she does this without even a blind of the eye…big sigh
Rich Vail
Pikesville, MD
This is a hilarious observation.
Thank you so much for posting this fact of reality. It needs to be exposed how Hollywood protects itself from taxes: tax breaks, tax credits, business write-offs, etc. Can YOU, Joe Average, write-off your latest flat-screen TV purchase as a business expense?
The benefit from incorporation is mainly self-employment-tax reduction and boosting your pre-tax retirement plan contributions. So they are going to get hit like the rest of the 10% of the country who pays all the income taxes. The rest will get refund checks paid for not by our children, as the cliche goes, but by those of our children who are productive and hard-working. Unless they have emigrated.
The best tax policy would be to repeal the regular income tax and keep the Alternative Minimum Tax. The AMT hits hardest in major coastal cities, due mostly to high local property taxes and state income taxes. That is where most liberals live too. Liberals say that they love higher taxes, and they should be forced to put their money where their big mouth is.
Yup, Hollywood, they put the hip in hypocrisy.
Don’t forget the production companies with bank accounts in Switzerland or The Cayman Islands.
Just how does one incorporate themselves to avoid taxes? I own an LLC and I write off as much as possible, including electronics such as my large HDTV and other stuff. Even so, I don’t pay fewer taxes than I otherwise would, without being incorporated.
I wish lowering my tax burden was as easy as filing incorporation papers but it isn’t. Perhaps some clarification is in order instead of a short paragraph making a claim without any data. After all, making vague statements is what the left does, and let’s not emulate them.
I like how the only substantive comments here are basically asking “WTF are you talking about?” and the rest have no understanding of how taxes work.
Silly woman, don’t you know that paying taxes is just for us little people?? The denizens of Hollywood, like most limousine liberals, are income tax hypocrites and will remain so as long as they’re able to hire batteries of experts tasked to keep their own taxes as low as possible. At the same time, most advocate for higher taxes (especially on the “wealthy” and evil corporations like the oil companies). I wonder if they realize that they don’t *have* to avail themselves of all the allowable write-offs, deductions and shelters or that they can make an outright contribution to the federal government via the IRS. Remember when Teresa Heinz released her tax return and we saw that she paid less than $350K in taxes on income of over $5M? Mrs. Kerry, who contributes massive amounts of money to lefty organizations and causes through Heinz family foundations, has sufficient wealth to be able to invest heavily in low-yield, tax-free bonds (not that there’s anything wrong with that). Most of us working schlubs just have our pockets picked before we even get to see the money we’ve earned.
The Hollywood crowd are hypocrites in any number of ways. They, for example, present themselves as huge union supporters and yet they have no problem taking their movie making to non-unionized venues for the sake of a fatter bottom line and, possibly, a bigger paycheck for themselves.
Name names.
This got me wondering about some of those “Lefty pals”: If they have substantial assets to handle, surely they aren’t stuffing it in their mattresses, right? They would be investing in the markets, right? (Even though the “eat the rich” approach assumes just the opposite for everyone else.) It’s hardly universal, but people tend to get more economically conservative as they have more of a stake in the economy. So how does it happen that some of the most incoherent and doctrinaire lefties are those same Hollywood types who are blessed with success?
Then I remembered the tax/incorporation comment that started this train of thought. Smug, hypocritical, doctrinaire, ignorant, damaging to others and self-destructive. Those threads weave through a whole lot of liberal thought. I guess I can believe the story as Ms. Graham tells it.
My family makes $30k/year, and we have 2 kids. We qualify for most social programs and received $4000 above our tax refund last year. Why? I don’t know.
To all democrats: We’re NOT poor, and we don’t need your “help.”
My in-laws do have an S-corporation set up and write off EVERYTHING. They go out to dinner – business expense. They rent their house out to the corporation which is a deduction for the business. Then, they claim rental income, but write off interest, taxes, insurance, etc to offset it. This seems counterproductive, but they do this with their cars, too! By renting the house to the corporation, they then write off all utilities and associated bills for lawn care, maid service, etc. Trust me – it is a huge savings! They gross $360k, and they net $360k.
Tax evasion? YES. Legal? It would seem so.
Yeah Hollywood likes taxes…but for others to pay. Why are so many movies now done in Canada? They don’t have to pay the high taxes of California. (Drum beat)
Everyone is wondering, “Are your in-laws Democrats?” YES!
I’m a fairly hard-core conservative, so please don’t take this as apologetic… but anyone can incorporate. There are legal and illegal ways to use the tax benefits of a corporation, and those decisions are up to the individual and their CPA.
You don’t have to be a ‘Hollywood Liberal’ to enjoy the benefits of incorporation.
Most of these folks have CPAs, twice removed through a management agency, financial adviser, etc. who leaves them with the impression/feeling that they are insulated from real world economic woes; just as they are insulated from real world people by pubicists, management agencies, etc. The disconnect is virtually complete in all modes in their lives and so the nightingales sing only to other birds in the aviary not realizing that a large cage does not constitute a functioning (independent) world. Their keepers will keep them safe.
Angie,
If they are writing off things for their S corp they couldn’t take off from a straight Schedule C, they are going to have some very bad days when the audit comes. If they gross $360K and take all of it home for personal use, that does sound like tax evasion and it is not at all legal. For their sake I hope there is more to the story.
Brandon,
Please describe these benefits. Yes, anyone can incorporate. It would just be stupid for most people to do so. A number of us are very curious how, best case, an individual’s pass through entity improves his personal tax situation.
One thing that is indisputably true is, if you are *already rich,* then very little in the way of new taxes has any chance of changing your lifestyle. High taxes don’t stop douchebag limousine liberals from being rich, it just stops entrepeneurs like me from joining their ranks– an outcome they’re more than happy with.
If you have money and an unremarkable IQ (third-generation money in New York, an actor who drank the Global Warming koolaid, etc) you’d love nothing more than to close off the rich kids club to include nobody who reminds you that you’re not very smart. In other words, old money/dummies with money would love to turn America into Europe. Meritocracy is like Kryptonite to a rich liberal.
It is incongruous to me that these actor types complain that they never get paid enough while being Obama supporters, with his $200,000 oops, I mean $120,000 tax raises. Unless you’re doing commercials for Mighty mend-it , you’re screwed.
I’ve been doing taxes for 3 years now and am working on my CPA, though I’m not there yet, so I know a little something about incorporation and taxes.
First I’m not sure how most actors get paid. If they get a gross wage, with no taxes taken out, then they can incorporate and put the money in the corp as income. If they receive a paycheck like everyone else then incorporation does nothing for them for those paychecks. Also any extra money made from speaking engagement or anything like that could also be put in the corp.
As for the person who’s in-laws deduct everything, good luck with that strategy. Because of the amount of money they’re likely hiding from the government the statue of limitations for tax evasion won’t run out and they’ll spend the rest of their life looking over their shoulder for IRS agents.
Business deductions need a business person. A husband and wife going out to dinner isn’t a business deduction, even if they’re both officers of the corp and they discuss business. There is no business purpose in the dinner. If they go out to dinner and take their friends with them who are sometimes customers, then you get a 50% deduction.
Some people play fast and loss with deductions but they have to realize that if they get audited they’re likely screwed. You can claim that all meals are business related however the IRS will ask the business purpose of each one and who was there, no business purpose, no deduction. Same with car mileage, you better be ready to produce a mileage log for the entire year showing where you went, who you saw, and about what. Gym memberships… not deductible… ever…. quit trying… Any article of clothing that can be worn during non-business hours, non-deductible. So that means business people can’t deduct their suits and fitness instructors can’t deduct their workout clothes. However, mechanics would be able to deduct coveralls (though, possibly not steel toe’d boots) and any article of clothing you buy that has your company’s logo on it could be deductible as a uniform as long as it was required to be worn during business hours.
There are potential advantages to incorporation that allow you to defer income by keeping it within the “business” and paying a lower corporate rate. Also, assets can be purchased or leased by the corporation that might not otherwise be deductible, allowing the money that was used for those expenses to have been taxed at the lower rate (put another way, you can pay for things with money taxed at the lower corporate rate by buying them through the corporation without the money ever having technically been income to you personally, whereas if that money had been personal income it would have cost you more in taxes). In some cases, a husband and wife or living partners could split the money made by one of them by having it paid to the corporation and having the corporation pay it out as separate salaries, potentially reducing the tax burden that would have been placed on the entire sum if it were one person’s income.
Like the previous poster said, however, if you’re audited you very well may be screwed. Most of the advantages are more theoretical than practical, and probably wouldn’t pass the scrutiny of an auditor.
Wow, you just opened the pandora’s box. I won’t tell you what I do in Hollywood, but the incorporation thing is a HUGE deal and nobody reports on it. Nor will they, if they ever want to work in Hollywood again. Don’t forget bifurcation and paying a portion of the salary to an offshore (foreign) corporation.
Zero,
First paragraph sounds like avoiding the Social Security bite by converting wages to investment income. I stand corrected to a point. As I understand it, that could lessen the medicare taxes, and I guess some Social Security as long as you keep your salary under $90K although the requirement of a reasonable wage as an officer/employee would make that trick here, but it would not touch income tax.
Is that the deal here or is there more to it? Now that you describe it, I seem to remember John Edwards getting some attention for that. Fine enough and I don’t grudge anyone minimizing their liability, but I don’t see yet how such people’s income tax liability wouldn’t be affected by raising the rates.
Don’t you love when people who get free luxury swag promote tax-raises for us plebeians (those of us who don’t receive swag)?
When I worked as a film extra (long ago), I once was told not to make eye-contact with a film’s star, and another time I was chewed-out publicly by a rottweiler of a P.A for daring to stand near the actors in the lunch line… rather than the back of the line.
So I just have to laugh at all their concern for the “little people.”
Original Cyn – January 6th, 2009 at 10:07 am
“Don’t forget the fact that they own a California home which they live in the majority of the time, but then own a home in a state with no state income taxes like Texas, Wyoming, etc and claim that as their main residence.”
Wow. Just like Dick Cheney
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