“Man will begin to recover the moment he takes art as seriously as physics, chemistry or money”   Ernst Levy

 

What’s the best capital gains tax rate for the sale of artwork? There are currently  several arguments being made against reducing the capital gains tax rate on the sale of artwork from the current level of 28% to the 15% rate enjoyed by sellers of real estate, securities and other assets.  Arguments against the reduction center around the view that art is not an asset which plays any real role in economic activity, particularly job creation, and revenue generation.  Nothing could be further from the truth.   

 

When the forces against tax reduction argue that to do so might shift money into art at the expense of more productive activities they fail to appreciate the significant and documented economic impact that art has made and continues to make on everything from job creation, to neighborhood redevelopment to tourism. 

 

Uneven tax policy has also played a role in reducing museum offerings, and hence the public’s access to art as a result of the tax treatment of artists.  Since they are only allowed to write off the cost of materials for donated works instead of the fair market value of the artwork, artists are less inclined to make donations. The negative impact on museums is compounded by the strength of the art market of late, particularly for Contemporary art, all of which reduces museums’ ability to acquire work.

 

Nevertheless, the value of innovation to our society is becoming more and more clear. Businesses that own and display art are perceived as being more innovative, interesting and desirable places to work.  Real estate developers are incorporating art galleries into new condominium towers to entice buyers seeking differentiable living experiences.  In connection with its recent renovation, the Aventura Mall in South Florida now includes a twelve-piece, museum-quality art collection designed to be a destination in a clear indication that creativity is valued and valuable.

 

In the third study conducted by the group Americans for the Arts titled Arts and Economic Prosperity III, data was collected from 116 cities and counties, 35 multi-county regions, and five states. The areas stretched from Walnut Creek, California to Anchorage, Alaska. They found that nationally, the arts generate $166.2 billion in annual economic activity, up 24% over the past five years. That’s greater than the 2006 GDP of either Malaysia, Chile, the Czech Republic, Columbia, Singapore, and the list goes on!  Furthermore, the arts provide 5.7 million jobs and contribute $104.2 billion to household income,and, they produce $30 billion in annual local, state, and federal revenue. 

 

Two specific examples:  In Baltimore City, Maryland, the arts are responsible for $270 million annually, provide 6,500 jobs, and generate $12.6 million in local government revenue.  In a study released in June, 2007, Rochester, New York (Monroe County) calculated that the attendance and sales revenues generated by its arts and cultural organizations were responsible for a total $199 million annual infusion into its economy. 

 

Far from playing a neutral role in this country’s economy, art continues to demonstrate its uniquely productive role as a strong generator of jobs and tax revenue, just as any other important industry. Therefore there really isn’t any defensible rationale for penalizing art investors with an incremental 40% tax bill.

 

 

Capucine Price

http://www.CapucinesBoulevard.com

Email: Support@CapucinesBoulevard.com

January 15, 2008

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