For Hollywood, a Tax Too Far

“Businesses that support Democrats have had a good deal up to now. When Democrats are in power, they get the kind of special deals that Democrats dole out to their supporters,” Glenn Reynolds writes in the Washington Examiner today. “When Republicans are in power, their taxes don’t go up because Republicans don’t like tax increases. Well, perhaps Republicans should take Democrats seriously in their call for ‘shared sacrifice.'”

Well, the debt deal is behind us, but it’s clear that the White House wants more taxes. Instead of fighting this head-on, the GOP might want to think about future ways of giving President Obama what he says he wants. Done properly, it just might be what academics like Obama call a “teachable moment.”

One of the things that’s been floating around the Web over the past week is a video clip from 1953. It’s a short film produced by the motion picture industry, seeking the end of a 20 percent excise tax on movie theaters’ gross revenues that had been imposed at the end of World War II as a deficit-cutting measure. (Yes, gross, not net).

In the film, figures ranging from industry big shots to humble ticket collectors talk about how the tax is hurting their industry and killing jobs, and ask Congress to repeal the tax.

They even explain, in a sort of pre-Art Laffer supply-side way, that a cut in theater taxes might actually produce an increase in federal revenues as the result of greater economic growth.

The effort — which includes a call aimed at “Congressman John Dingell,” father of the current Rep. John Dingell, who took over from his father a mere two years later in 1955 — ultimately succeeded.

But while I’m usually for tax cuts, in this case I think that’s too bad. Because with this battle over, Hollywood stopped talking loudly about the damage done by high taxes, pretty much for good.

When, since, have we seen such a firmly expressed appreciation of the harm that excessive taxation can do to the economy, voiced by representatives of the entertainment industries?

Today, those industries are a major source of Democratic contributions and spread-the-wealth rhetoric, even as they prosper based on this tax cut, and numerous other bits of favorable treatment scattered throughout the Internal Revenue Code. It’s time for a change.

Were I a Republican senator or representative, I would be agitating to repeal the “Eisenhower tax cut” on the movie industry and restore the excise tax. I think I would also look at imposing similar taxes on sales of DVDs, pay-per-view movies, CDs, downloadable music, and related products.

I’d also look at the tax and accounting treatment of these industries to see if they were taking advantage of any special “loopholes” that could be closed as a means of reducing “tax expenditures.” (Answer: Yes, they are.)

Congress should also perform a thorough study of the lighting equipment that Hollywood uses, and then begin to phase out those with the largest “carbon footprint.” Similarly, James Cameron has hectored Americans to reduce consumption, noting that “DVDs are wasteful…It’s a consumer product like any consumer product” — while simultaneously hawking three different DVD versions of Avatar. Perhaps it’s time for Congress to put a moratorium on all Hollywood product in the name of Gaia.