Allan Rolnick, CPA
When you think of a labor strike, you probably picture a line of blue-collar workers carrying picket signs in front of a coal mine or factory. The Writers Guild of America, which represents 11,500 entertainment writers, hardly fits that mold. Yet the WGA strike, which began May 2, is already rippling through Hollywood. It’s going to cost a lot of people a lot of money – including the federal, state, and local tax collectors counting on part of that lost income to finance their productions. At first glance, you might dismiss screenwriters as spoiled, Porsche-driving elites with a higher-than-average chance of dying in an accident involving downers and a hot tub. The average WGA member makes $260,000/year. But don’t be fooled by that number. It includes hotshots churning out Marvel scripts at one end and journeymen cashing $8 residual checks at the other. Most of the spoils trickle up to the top few, while thousands make literally nothing in any given year. Producers have turned writing into just another freelance gig. Why strike now? It’s mostly because Hollywood economics have changed dramatically since the last collective bargaining agreement in 2008. Specifically, viewers have cut their cable cords and switched to streaming services that don’t pay residuals. The Guild also wants to extend wage and staffing minimums to members who write for new media. And they want to prevent producers from using ChatGPT and other forms of AI from squeezing out actual humans. (Just because Skynet is busy working to become self-aware doesn’t mean there isn’t time to churn out a script or two.) The WGA strike will affect everyone in Hollywood.
When writers shut down productions, they shut down directors and actors, too. They shut down makeup artists, craft services, and the genius costume crew. Sympathy strikes are spreading to places like Bollywood and Portugal (a key shooting site for British filmmaking). And writers aren’t the only group hurt by the move to streaming, which suggests it’s just a matter of time before the writers’ strike starts inspiring other Hollywood unions. Some state tax collectors may come out ahead in the short run. For example, Georgia pays out $1.3 billion per year in film production tax credits. That’s lured enough shoots to earn the state a new nickname: “Y’allywood.” State auditors have found the credit actually costs the state money, so cutting it makes fiscal sense. But that would mean chasing away millions in tourism and hospitality spending. That, in turn, hits income and sales tax revenue. Back in Hollywood, though, it’s a different story. California’s top state tax rate – 13.3% on income over $1 million – is the highest in the country. It’s fair to say that a big share of those two-comma salaries will suffer from the strike. And Los Angeles has just instituted a new “mansion tax” to help finance affordable housing. Starting in April, sellers pay 4% on home sales above $5 million and 5.5% on sales above $10 million. But how can the city collect the new tax if out-of-work industry types can’t afford to trade up from the neighborhoods where you can almost smell the money to the ones where you really can smell the money? Today’s streaming platforms have stockpiled so much content they could go for months with nothing new. Netflix alone has produced over 3,000 TV series, movies, documentaries, and standup specials. But the fact that you’ll never have time to watch them all doesn’t mean the strike is an ivory tower debate. And it’s a great example of how everything you read about in the news affects the taxes we work to help you minimize.
Allan J Rolnick is a CPA who has been in practice for over 30 years in Queens, NY. He welcomes your comments and can be reached at 718-896-8715 or at firstname.lastname@example.org.