Hilary G. Escajeda is an associate professor of law at the Mississippi College School of Law.
In this article, Escajeda outlines the differences in how musicians, other artists, and regular wage earners are taxed, and she questions why songwriters are eligible for capital gains treatment while poets are subjected to ordinary income tax rates.
Copyright 2024 Hilary G. Escajeda.
All rights reserved.
Taylor Swift’s songs inspire generations of fans to sing and dance about love and to shake off heartbreak. Swift’s hard-earned reputation for being a savvy music mogul inspires other creative spirits to be fearless in their artistic endeavors. However, unless these artists are songwriters or musicians, they should keep their eyes open when selling their works, as they may see red when they discover their tax rates.
For music listeners who are not English undergraduate majors turned tax law professors, there is no reason to know — or even care — that financially living one’s wildest dreams may depend on the taxpayer’s artistic medium. Provoked by Swift’s February proclamation, “All’s fair in love and poetry,” and the recent release of her album, The Tortured Poets Department,1 it has become my nerdy tax mission to highlight and amplify a curious dysfunction in U.S. tax law that distinguishes between songwriters and poets. Specifically, why does the code tax the sale of poems set to a beat more favorably than poems without a beat? In particular, songwriters may be eligible for preferential capital gains treatment, while poets will be subject to ordinary income rates.2
To avoid savaging by “Swifties” and my nieces’ scorn, I publicly declare that Swift is an extraordinary talent and brilliant entrepreneur. Because she has not sold her catalog of works, Swift presumably pays ordinary tax rates on any royalty and performance income she earns from her new and rerecorded music compositions from all her eras. Accordingly, I wish her peace and happiness.
Instead, this author takes issue with how our current tax laws treat the sale or disposition of artistic works. As an illustration of this bad tax karma, consider contemporary poets Ada Limón and Amanda Gorman, who are taxed at ordinary income rates when they sell a collection of their poems, prose, and copyrights (10-37 percent). By contrast, when singer and songwriter Bob Dylan sold his collection of songs and copyrights for $300 million, he was eligible for lower capital gains rates (0-20 percent) under a special tax provision for the sale of “musical compositions.” Since their artistic genre does not include a musical beat, poets Limón and Gorman do not have the opportunity to convert ordinary assets into capital assets and thereby lower their tax bill.
It is not a juicy news scoop that current tax policy is unprincipled, given congressional dysfunction and the power of special interest lobbyists. My issue is that U.S. tax law should not pick winners and losers just because a concerted lobbying effort by musicians and songwriters resulted in a special capital gains tax election. If supporting artists is deemed a worthy public goal, tailored and targeted tax policies could be designed through thoughtful study and public debate instead of a special interest glitch. When such a discussion occurs, Congress must consider whether a select group of taxpayers deserve preferential rates, given that most of us are subject to ordinary income rates. (And yes, other code provisions merit similar scrutiny.) Inspired by Swift’s lyrics, my objective here is to point out how our current tax laws breed bad blood between musicians, other artists, and regular wage earners.
While the code will never be a cozy cardigan, it can at least be coherent. For defenders of the tax status quo who say, “You need to calm down,” the issue remains whether the advantageous tax treatment for songwriters is justified over poets who similarly fill blank spaces with heartfelt, insightful, and clever turns of phrase. As of this writing, the evidence shows that the code is a tax Frankenstein bizarrely stitched together with benefits that serve the special interests of select groups.3 Riffing off of Swift’s verses posted in her February Instagram proclamation, the “pitch black ink”4 of the code reveals two sharp truths. First, there is no tax relief for writers of love poems — only for those who write love songs. Second, ticking tax — not love — bombs may explode on less congressionally favored artists who sell their creative works.5 It is time for Congress to slay its tax monster so that love songs, stories, poems, and other artistic works are taxed harmoniously in a state of grace.