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How Trump's Tax Policy Hurts Hollywood Workers

How Trump's Tax Policy Hurts Hollywood Workers

According to payroll specialists, come tax time, the town is going to be "hit by a two-by-four" despite Trump preaching he is responsible for tax breaks.

When it comes to tax breaks in Hollywood, Donald Trump giveth and Donald Trump taketh away.

The Hollywood Reporter surveyed multiple payroll service companies â€" their accountants are hired by studios to cut the checks for the actors, crew and craftsmen who make their living hopping from film to film â€" and learned that the average on-the-set worker has seen about a 5 percent bump in his or her pay stub since the passage of the Tax Cut and Jobs Act of 2017. But those same accountants are quick to point out that in April, the federal government will be grabbing back that 5 percent and may be a lot more, thanks to the law's stingier freelancing rules and caps on property tax deductions (especially painful in pricey real estate zones like California and New York, where most of the industry's 2.4 million workers reside).

"Entertainment workers aren't going to see what hit them until they file their tax returns next year," warns actress and tax attorney Sandra Karas, secretary treasurer of the Actors' Equity Association, who estimates that 75 percent of her guild will be paying more taxes this year. She calculates, for instance, that an unmarried industry worker in California making, say, $38,500 will pay close to 10 percent more this year. "They're going to be hit by a two-by-four," she says.

While the new tax laws haven't altered the day-to-day operations of the payroll service companies â€" they're still printing checks the way they always have, just slightly bigger ones â€" the changes have sent t he rest of the industry, from tax attorneys to business managers, scrambling to find loopholes. The new code is complicated, and how it will end up being applied is still uncertain, but there are ways Hollywood workers might be able to soften the looming tax blow. Setting up a pass-through company under the new law's 199A section could be one solution: It permits up to 20 percent of one's expenses to be written off. "I've gotten hundreds of calls this year from people who want to form corporations," says Karas. "They're forming them left and right." But for workers who get their checks through a payroll service, that may not be an option, since the law appears to cut them out of the pass-through deduction. Also, the law appears to prohibit certain professions â€" like actors â€" from partaking in the 20 percent benefit, at least for those earning more than a certain amount ($157,500 for singles, $315,000 for couples).

Another way of dea ling with Trump's tax law: Leave California. "Some of my biggest achievements this year have been convincing clients to move to a different state," says business manager David Weise. He recommends Texas, Florida and Nevada, where property taxes are much more livable.

Of course, not all the news is bad. Nick Tsahalis, CEO of payroll service company Maslow Media Group, points out that Disney, AT&T, Comcast and other entertainment giants issued $1,000 bonus checks to workers because of Trump's tax cuts, which are saving those companies billions by dropping the corporate rate from 35 percent to 21 percent. "The tax code was written to provide benefits to individuals while also helping employers," Tsahalis says. Another bonus: The tax law is designed (in part by U.S. Treasury Secretary Steve Mnuchin, a former producer) to cut down on runaway productions going to less expensive countries. The code now allows studios to write off up to 100 percent o f their expenses for films and TV shows shot in the U.S., a change that could save Hollywood media companies as much as $2 billion a year.

Still, that's not super-comforting news to Karas. "I'm still in a state of shock," she says. "I keep hoping I'll wake up and everything will be back the way it was."

This story first appeared in the Oct. 10 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.

Source: Google News Hollywood

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