How the IRS Sticks It to Foreign Artists
Part III of a series
We are rightly proud of American movies and music's impact on the rest of the world. Historians are justified in making a big deal about “soft power,” i.e., the role of Hollywood, Levi's jeans, and Coke in shaping America’s image in much of the world — generally for the better.
Even as many of our city fathers were panicking over rock and roll and trying to ban Elvis, Europeans were going crazy over American rock music, just as they had embraced jazz and blues before that. America truly brought the world new forms of music, but it would not have meant anything if the world hadn’t been open to such influences.
Ironically, we may be the birth country of jazz, blues, and rock, but we have turned our backs on all three. They thrive in other parts of the world: There are as many jazz clubs in Shanghai or Tokyo as there are in all of the U.S., and there are rock bands all over the world who are as good as any from our golden era of rock. We just don’t know about them, partly for reasons I’ve discussed in earlier posts.
Even as we cycle through the ebbs and flows of musical tastes, we have also allowed ourselves to fall for the myth that the lack of other cultures’ influence on us is just because our stuff is better. It should be obvious how absurd this is on the face of it — most of our musical innovation is built on the heritage of music imported from Europe and Africa. But something else has been happening which is even weirder: For a couple of generations, our government has been actively shielding us from foreign cultural influences.
This may sound crazy to you, but in Part II of this series, I looked at U.S. visa policies and how they make it almost impossible for foreign performing artists to get a toehold in the U.S. market. Except for the biggest stars: Justin Bieber and Adele get fast-tracked. As ABBA would say, it’s a rich man’s world.
ABBA’s heyday predated some of our worst protectionist policies, but today, they would be fast-tracked too. The “not -quite-haves,” all those smaller acts just on the verge of breaking through, often after years of paying their dues in small clubs, have to grind it out even to get a visa hearing, let alone approval.
As I pointed out, these policies are not only unfair to the artists but cheat us, the fans, by keeping us in the dark about most of the artists and music outside our borders. And all of this to protect our entertainment industry? What other reason can there be?
The big studios and promoters already have the top foreign talent locked into contracts. For them, it’s a net benefit to be able to offer those stars fast-track treatment, for example, to enable them to work on a major film or concert project. But the smaller acts are just a threat to their hegemony, so why not freeze them out? The corporate bosses assume we will never know, and largely, they are right.
You may wonder, why get a visa at all? After all, forty countries are members of our reciprocal Visa Waiver Program, including all of the European Union countries. Let’s say you are a German software programmer or sales manager: You can come to the U.S. for up to 90 days for any purpose at all. Let’s say your employer sent you here to work on a project. You get to come and go as needed, and you don’t need to report your wages to the IRS. You get paid in Germany and taxed in Germany, the same as before.
Unless that is, you are an actor, athlete, or musician.
If you are one of those, you not only need a special visa (one of the O or P class visas, see Part II for the gory details), but you have to pay U.S. taxes. In fact, your promoter or agent in the U.S. must withhold 30% of your income right off the top—gate receipts, merchandise sales, whatever. So they made you jump through hoops to get here in the first place, and then they promptly scalp you.
This is the financial penalty the IRS imposes on foreign artists. We don’t do this to software coders. I ask you, who is the bigger security risk, a software engineer or a pop singer? (That was a trick question.)
If you have ever worked overseas or have had workmates from abroad, you know about tax treaties. The U.S. has tax treaties in place with around 70 countries, which provide protections for cross-border employees so they don’t get double-taxed.
In other words, even if a visa waiver does not cover you, if you are from one of those countries, you can get out of most of your U.S. taxes by proving you paid taxes in your home country.
Unless that is, you are an actor, athlete, or musician. Notice the pattern?
Those categories have been carved out from the protections offered under our tax treaties. You can petition your home government to forgive your taxes there, but there is no assurance they will grant it, and they usually don’t.
Most foreign musicians who do manage to tour the U.S. have no choice but to work with one of the big management groups. The biggest is LiveNation, which is currently taking heat even from American artists for being effectively a monopoly. If you work with LiveNation as your promoter and you are not a U.S. resident, they are legally required to withhold 30% of your gross revenues to pay taxes. That does not even cover state taxes, which vary from state to state.
Is this sounding repetitive? It should. The combination of visa policies and tax policies means that 1) only the biggest, most successful foreign artists have a decent chance of performing live in the U.S., and 2) even if they manage to get here, the U.S. government whacks them for 30% of their gross earnings before they even get on the plane to go back home.
Does this matter? Well, if you are a foreign artist or performer, of course, it matters. But I think it should matter to fans here as well. We make up 4% of the world’s population and create 4% of its art and music. How does it enrich our lives to be denied access to the other 96% of the world’s creativity?
Of course, many of us think that we don’t hear anything other than our own Billboard 100 because there isn’t anything else worth hearing. (I won’t get into a debate over how much of the Billboard 100 is worth hearing — we are all entitled to our opinions.) The problem is there are, in fact, influencers who tell us what is good, and most of the market goes along with it. The industry actually has a term for them: “tastemakers.”
Tastemakers used to be corporations like Warner Bros. or individuals like Johnny Carson and Ed Sullivan, who could make or break artists by featuring or not featuring them on their shows.
Today some of the corporations, personalities, and mechanisms are different, but the principle is the same: we are constantly being conditioned to see and hear certain things and not to see or hear other things. There are cracks in the wall — the biggest being YouTube — but to peek through them, you need to know what you are looking for.
Babies raised with certain colors missing from their environments lose the ability to perceive them. We have less say in our music or art choices than we believe. Think about it, and think about how that shapes the incentives of the big music labels. Why would they want us to be interested in new or different sounds? It just makes their lives more complicated and less profitable.
Unsurprisingly (or perhaps, surprisingly, if you hadn’t thought about it before), our music industry has approached this issue the way any industry making widgets (or cars) does: It has de-prioritized creativity in favor of predictability. It has attempted to automate songwriting, and now, in the age of chatbots like ChatGPT, it seems on the verge of succeeding. It has resorted to lobbying for — and getting — blatantly protectionist policies.
We are the big losers.
I want your thoughts on this issue. Does it matter? Why or why not? Is there a political constituency for reducing the barriers to foreign artists?
Sources:
U.S. Citizenship and Immigration Services https://www.uscis.gov/working-in-the-united-states
Artists from Abroad website https://www.artistsfromabroad.org/immigration-procedures/
Artists From Abroad: Tax Requirements https://www.artistsfromabroad.org/tax-requirements/
Conversations with concert promoters
Internal Revenue Service: Taxation of Foreign Athletes and Entertainers https://www.irs.gov/individuals/international-taxpayers/taxation-of-foreign-athletes-and-entertainers
“Color Perception is Learned, not Innate” WebMD, 2004 https://www.webmd.com/children/news/20040727/color-perception-learned-innate