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A tax overhaul passed Wednesday will slash taxes across the board, including for corporations and wealthy Americans, and is expected to save Hollywood corporations billions of dollars each year, so much that Comcast and AT&T have already announced $1,000 bonus checks will go out to hundreds of thousands of employees.
The bill cuts the corporate rate from 35 percent to 21 percent, and it is expected to save the six largest media conglomerates a combined $6 billion annually, or more, according to SEC filings and financial reports.
The bill also addresses runaway production with the inclusion of a rule that goes into effect next September and allows for a 100 percent expensing of production costs if 75 percent of a film or TV show is made in the U.S. That’s up from zero today, and a rule that expired in 2016 was good for only $15 million of a production, while the new one has no limits. This new provision, says one film-biz insider, will save the industry about $2 billion annually.
Charles Rivkin, CEO of the MPAA, which lobbies lawmakers on behalf of the film studios owned by Disney, Viacom, Sony, 21st Century Fox, Comcast and Time Warner, quickly praised the bill as a way to “promote further economic growth across American industries, including the U.S. film and television sector, which supports 2 million jobs and a network of thousands of small businesses across all 50 states.”
Added Rivkin: “This legislation will advance our nation’s global competitiveness and encourage additional investment at home.”
Comcast announced Wednesday that the tax cut, coupled with the FCC’s recent decision to repeal so-called “net neutraility,” has encouraged the parent of NBCUniversal to give more than 100,000 frontline and non-executive employees $1,000 bonuses. Comcast also said it will spend more than $50 billion in the next five years on “infrastructure to radically improve and extend our broadband plant and capacity, and our television, film and theme park offerings.” Comcast also said the company will “add thousands of new direct and indirect jobs.”
And AT&T, which is attempting to buy Time Warner for $85.4 billion, was so giddy about the plan that it said it will celebrate by giving each of its 200,000 union, non-management employees in the U.S. a $1,000 bonus, and also pledged to spend an additional $1 billion domestically next year.
“Congress, working closely with the president, took a monumental step to bring taxes paid by U.S. businesses in line with the rest of the industrialized world,” said AT&T CEO Randall Stephenson. “This tax reform will drive economic growth and create good-paying jobs. In fact, we will increase our U.S. investment and pay a special bonus to our U.S. employees.”
Another benefit of the tax bill for Hollywood is something that was not included: a provision that would have required advertising expenses to be amortized over years instead of being able to deduct them all at once. This helps studios because they spend so heavily to promote their films and it’s even more beneficial to the television industry as it encourages all businesses to advertise on TV. Some lawmakers advocated such a provision of taxation on advertising in order to “pay for the tax cuts.”
Indeed, critics of the bill not only say it favors corporations and the rich over the middle class, but they also complain that it will add $1.5 trillion to the national debt over a decade. The bill passed along party lines in the Senate and a 224-201 vote in the House, and the president is expected to sign it shortly.
One critic, the Writers Guild of America West, called the tax bill “a disaster” because “Congress and the president have skewed the tax system heavily in favor of the rich; next they will use the resulting budget crisis to defund Medicare, public education and Social Security.”
The WGAW also said: “Middle class writers are not immune to the forces of inequality. We will be doing our best to help writers understand the implications of this legislation for them. The WGAW stands with those who will resist.”
The Tax Policy Center crunched the numbers for the bill and says that families making $50,0000 to $75,000 will save an average of $890 a year; families making between $100,000 and $200,000 will save $2,260; and families making more than $1 million — like many of the top executives and celebrities in the entertainment industry — will save $70,000 yearly. Also, a $1,000-per-child tax credit doubles to $2,000, and even families that pay no taxes can get $1,400 in refunds from the IRS.
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