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Artists' Exemption Is Unfair

Rationales given in justifying an exception for the creative community are groundless.

June 15, 1997|MELANIE HAVENS | Melanie Havens is an attorney and a professor and chair of the Department of Business Law at Cal State Northridge

Recent news of a proposed exemption from home-based business taxes has inspired a lot of enthusiasm from the writers and artists who would benefit. But would it be fair?

Under the current system, all those who operate home-based businesses pay a city tax. The proposed revision would exempt those in the creative community. This would keep in place the current system of taxation for all other home-based businesses, which includes everyone from accountants to veterinarians. Proponents give three basic rationales justifying the exemption:

* Why tax the little guy when it's the studios that have the big bucks?

This is an apples-and-oranges comparison. To complain that the studios get tax breaks is irrelevant: Governments may well find it beneficial to the tax base to provide incentives for large companies to locate within a city's boundaries. That they still tax small companies or individuals is irrelevant to the issue of such incentives.

The real question is whether it is fair to tax home-based seamstresses while exempting home-based screenwriters. The analogy isn't "the little guy against the corporate giants" since the corporate giants don't pay home-based taxes anyway. The correct analogy is "the little-guy-artist against the little-guy-caterer." Why should those in the artistic community be exempted from a tax that applies to all other home-based businesses? Which brings us to their next argument . . .

* It's not fair for artists to pay taxes since we don't impose a cost on the infrastructure.

Under this rationale, creative people should be exempt from taxes since, unlike other home-based businesses, they do not create a burden on city services. A home-based real estate agent, for example, whose clients come to his house creates a greater cost to the city, in the form of maintaining city streets and providing city services, than does a home-based writer who never exits WordPerfect. Maybe.

But the proposed law does not exempt home-based businesses on the basis of whether they create a demand on city services; it provides the exemption solely on the type of work activity. A home-based screenwriter who holds business meetings at home, has packages delivered daily and makes twice-daily latte runs would be exempt, while the home-based computer programmer, who transfers all his work via modem, would be taxed. For the rationale to work, the exemption would come to those who create little or no demand on city services, regardless of whether they were creating animation cels or baking scones. Implementing such a scheme, of course, would be next to impossible.

* The creative community should be exempt from taxation because we're integral to the city's identity

If we can be considered a "company town," that company has to be the entertainment industry. The creativity and glamour of the entertainment industry should be encouraged to flourish, and what greater encouragement can we give than a tax break?

So far, so good. But every time we exempt one group from taxation, it means the rest of us pick up that share of taxes. The revenue is going to come from taxpayers--the need for those funds won't disappear simply because one group has been eliminated from the pool of contributors. So we're back to our original question of whether it is fair to treat home-based workers in the arts differently from other home-based workers.

Supporters of the proposal claim that they are exempt under the 1st Amendment, which protects free speech. This is hogwash. Writers are subject to the same taxes that the rest of us pay. The federal and state governments have no qualms about taxing those who derive income from the exercise of their 1st Amendment rights. If the 1st Amendment compelled the government to exempt writers from income tax, they'd have to exempt all writers, not only the professionals. Since we're all writers on some level, and since we are all protected by the 1st Amendment, then the government would be effectively barred from taxing any of us. Wait a minute, I'm starting to warm to the idea.

Home-based business taxes may well be inadvisable because of the difficulties with collection, the minimal revenues generated and the disincentives created. But no policy reasons exist to treat the home-based creative community differently from the rest of us.

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