Keira Giacometti

27 October 2023

The long-awaited end to the Hollywood strikes is imminent. The Writer’s Guild of America (WGA) and the Alliance of Motion Picture and Television Producers (AMPTP) have finally come to an agreement, securing a massive win for the writers. The Screen Actors Guild of America (SAG-AFTRA) has a bit longer to wait, as the AMPTP walked away from their negotiations on October 12, 2023. The sudden stop of most Hollywood productions is due to the rising cost of living with no moves from the government to raise the national minimum wage from $7.25 an hour, as well as media corporations like Disney and Warner Brothers threatening to replace artists with AI. The WGA agreement promises things like raising a writer’s minimum wage and leaving the choice of AI usage up to the writers. Despite this, it cannot be guaranteed that in 2026—when the contract expires and the cost of living rises higher—these policies will be kept up-to-date. After all, the last major Hollywood strike was in 2007, and their agreements regarding residual payments from DVD sales and online services became outdated very quickly, as DVDs have largely been phased out and the agreement didn’t discuss writer residuals for streaming services (1). So, the question must be asked: how can corporations and unions work together to create a permanent solution— one that can work around Congress’ refusal to raise the minimum wage and protects the work of writers from AI? Fortunately, there is an answer: tax incentives. 

Before we can discuss tax incentives as a solution, though, we have to acknowledge the root of the Hollywood strikes. AMPTP decided they could use AI for script-writing and copying an extra’s likeness into other movies; insisted on spending the bare minimum on expenses like hair, makeup, and relocation; and refused to raise the compensation cap on pensions and health plans (2).  SAG-AFTRA was requesting “an 11% wage increase,”(2) and WGA was asking for higher pay as well, as 49% of TV writers are paid minimum wage, even though there are more shows being written now than ever before (3). Companies like Paramount, Discovery, and Universal refused to accept these demands, which forced WGA and SAG-AFTRA to strike.  What is most upsetting, though, is that these strikes could’ve been avoided entirely. CEOs like Bob Iger, CEO of Disney, make enough money to generously pay every employee and still have enough left over to buy luxuries—like Iger’s second yacht. 

Next, we have to understand the agreement decided on by the WGA and AMPTP. The agreement is valid from September 25, 2023 to May 1, 2026—less than three years. In that time, however, WGA will receive massive financial wins. Writers’ payments will rise by “5%-4%-3.5%” (4) over the next few years, with 3.5% being the last raise they get before the agreement reaches its tentative end. In regards to pensions and health, the health fund will increase “by 0.5% in the second year of agreement, from 11.5% to 12%” (4). The raise in money put towards pensions and health plans will allow for more writers to be able to achieve basic healthcare. Currently, writers must make $41,773 in four quarters to qualify for healthcare, which is then only valid for one year (5). It takes years for some writers to reach this salary, and most never do (6). Finally, it was decided that AI would not be used to independently write scripts. Under the agreement, “writers can elect to use AI when performing writing services, if Company consents and provided writer[s] follow applicable company policies.” Media companies “cannot require writer[s] to use AI software,” and they “must disclose to writer[s] if any material given to writer[s] has been generated by AI or incorporates AI-generated material” (4). This new deal is worth $233 million/year, which is $196 million less than the original request from the WGA, which was estimated to be about $429 million/year. Despite that, the amount of money is still substantially more than the failed May 1, 2023 agreement, which was around $86 million. The money must be given out to writers for their work and will allow for more writers to live better lives without worrying about where to get the money for their rent or their next meal. 

Now, let’s compare WGA’s solution to the proposed solution of tax incentives. In the simplest terms, a tax incentive uses a business credit to incentivise a corporate behavior. They are designed by the government and can often provide companies with “a direct reduction in tax liability” (7). There are three types: nonrefundable, which “are valid in the year of reporting only;” refundable, which means that taxpayers are “entitled to the entire amount of the credit, beyond a zero amount of tax due;” and partially refundable, which means the credits are only refundable if “a taxpayer reduces their tax liability to $0” (8). Essentially, the incentive sets a flat rate for the employee, and if the company can prove that they have a certain percentage of something in their film, show, or some other job—say, a certain number of minority employees, a less than 2% usage of AI, or an implied statement supporting a popular opinion in Congress—a tax credit will be gifted to the corporation from the government, encouraging them to keep this behavior up. Thus, the company would keep the money otherwise spent on taxes, which would lower their spending and allow profit to climb. 

So, tax incentives sound great in theory, but how well do they play out in practice? For this, we can look at the state of Georgia, where many films and shows are produced. To be eligible for a tax credit in Georgia, a production must meet or surpass the “$500,000 minimum expenditure.” This can be done through “one project or the total of multiple projects aggregated in a single tax year” (9). Then, the project can be certified by the Georgia Department of Economic Development (GDEcD), which is overseen by the Georgia Department of Revenue. The maximum tax credit is 20%, which means 20% of a production company’s taxes will be deducted. On top of that, there is a “10% Georgia Entertainment Promotion (GEP) Logo Uplift tax credit, which is a 10% uplift on the base tax credit earned for approved projects that include an embedded Georgia logo within the completed project” that have been “distributed in multiple markets within five (5) years from the date that the first Base Certification Letter [was] issued” (9). What this essentially says is once the GDEcD decides that a project meets the requirements for a tax credit, they issue a certificate to the productions that tells them that they have five years to distribute the film before the credit no longer applies. Most big-budget productions are distributed long before that time is up, so companies almost always receive the tax credit. The employees can be paid no more than $500,000 per project and they must be paid in salary. According to ziprecruiter.com, the average salary for members of a film crew is $18.74 an hour (10), which is $11.49 more than the national minimum wage and $3.74 more than the $15 an hour that the Democrats are pushing for in Congress. 

Already, there is an established incentive for media companies to work towards a 30% tax credit within the state of Georgia put in place by the GDEcD. It is encouraged by the government for companies like Warner Brothers to put in a certification request for their productions. It saves the companies money, and the state of Georgia makes a major profit. For example, In 2022, productions filming in Georgia spent a “record-breaking $4.4 billion” (11)  on Georgia’s hotels, restaurants, and local businesses. As a thank you, Georgia gifts a tax credit to the studios for filming and bringing business to the state, and the spent money is collected by the Georgian government and businesses (11). Add onto that the fact that employees receive an established salary as long as the production is in Georgia and suddenly, enough money is made to satisfy both creative media workers’ salaries and the savings goal set by production companies. So why don’t other state governments, or even Congress, create a similar program that can be used nationwide? Or, if they don’t want to establish a nationwide tax incentive program, why does Congress choose not to raise the minimum wage? If Congress raises the minimum wage, then tax incentives don’t need to be brought to the national level, right? 

Not necessarily. In an article written by Richard V. Burkhauser, a professor at Cornell University, and Kevin Corinth, deputy director of the Center on Opportunity and Social Mobility at the American Enterprise Institute, it was discovered that there is little evidence that raising the minimum wage would reduce poverty. An increase in minimum wage from $7.25 to $15.00 “would reduce total employment by about 1.3 million workers, or about 0.8%” (12). Also, a minimum wage increase of 10% would decrease teen employment by 1.28%. Meanwhile, if Congress were to focus on tax credits, poverty would legitimately decrease because “[tax credit] raises only the after-tax wage rates of workers in low- and moderate-income families,” “increases with the number of dependent children,” and “increases labor force participation and employment.” (12). The tax credits do have different categories, such as those for childcare, education, retirement, and sustainable living, but once the money is in a bank account, it does not matter what it is spent on. These credits all have salary caps, so if an employee makes above a certain amount, they will not receive the tax deduction (13). However, those are just for the individual employee. A company earns its own tax credits, so they don’t have to take from employees.

  Additionally, a study done by Shankar Parameshwaran found that tax credit policies will “not extend that benefit to high income workers” (14). Tax credits are primarily used by employees for one-time deposits, like “car repairs or a security deposit,” (15) which means they can keep more money in their pocket for other expenses, like rent or groceries. CEOs will still make money from their business deals and movie productions, and their employees will have sufficient money from their wages to live life. Conversely, if Congress raises the minimum wage, the average worker may not make more money. The corporations instead may lay off more employees as they attempt to configure new productions around the wage change (14).

With all of that in mind, we can now compare the WGA agreement and tax incentives. Which would be better? The answer is tax incentives. As mentioned earlier, the WGA agreement is valid for less than three years. If Congress created a national policy that established refundable tax credits as a method of giving more money to the employee, people would repeatedly save money during tax season that they could use for personal expenses. In contrast, the WGA agreement rides on the hope that the AMPTP will be willing to either renegotiate or hold up their end of the deal in 2026. What happens if they’re not willing to adjust the deal to the state of the world in 2026? Will the writers go on strike again? Those questions can’t be answered right now, but if tax incentives become a more widespread or national policy, those questions may not have to be answered ever. There will be a solid plan in place to help people stay afloat as the cost of living continues to rise.

Tax incentives are needed to prevent Hollywood strikes in the future. They create a baseline for CEOs to build their productions off of, give employees extra money to use for their personal expenses, and do not affect the unemployment rate. If tax incentives are implemented in Hollywood, WGA and SAG-AFTRA will not have to fight with the AMPTP every time the wages or treatment of workers becomes unreasonable. 

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References

(1) Bramesco, Charles. “From Bond to Heroes: What Was Affected by the 2007 Writers’ Strike?” The Guardian, 4 May 2023, http://www.theguardian.com/culture/2023/may/04/2007-writers-strike-bond-movie-heroes. Accessed 8 Oct. 2023.‌

(2) “Why We Strike.” SAG-AFTRA Strike, 2023, http://www.sagaftrastrike.org/why-we-strike. Accessed Sept. 2023.

(3) Hellerman, Jason. “Nearly Half of All TV Writers Are Working at Minimum Pay Rate Scale.” Nofilmschool.com, 16 Mar. 2023, nofilmschool.com/tv-writers-less-money. Accessed 8 Oct. 2023.

(4) Anonymous. “What We Won.” Www.wgacontract2023.org, 2023, http://www.wgacontract2023.org/the-campaign/what-we-won. Accessed 30 Sept. 2023.

(5) “Pension & Health Plans.” Www.wga.org, 2023, http://www.wga.org/members/membership-information/benefits/pension-health. Accessed 16 Oct. 2023.

(6) Gaba, Charles. “A Fascinating Look at Health Insurance & the WGA/SAG-AFTRA Strike.” ACA Signups, 31 Aug. 2023, acasignups.net/23/08/31/fascinating-look-health-insurance-wgasag-aftra-strike. Accessed 16 Oct. 2023.

(7) Kagan, Julia. “Business Tax Credits: Meaning, How They Work, Example.” Investopedia, 21 Jan. 2021, http://www.investopedia.com/terms/b/business-tax-credits.asp#:~:text=Business%20tax%20credits%20are%20designed. Accessed Sept. 2023.

(8) Segal, Troy. “Tax Credit: What It Is, How It Works, What Qualifies, 3 Types.” Investopedia, 12 Feb. 2023, http://www.investopedia.com/terms/t/taxcredit.asp#:~:text=Nonrefundable%20tax%20credits%20are%20valid. Accessed 19 Oct. 2023.

(9) “Film Incentives and Applications | Georgia Department of Economic Development.” Www.georgia.org, 2023, http://www.georgia.org/industries/film-entertainment/georgia-film-tv-production/production-incentives. Accessed Sept. 2023‌.

(10) “Film Crew Salary in Georgia.” Ziprecruiter.com, 2023, http://www.ziprecruiter.com/Salaries/Film-Crew-Salary–in-Georgia. Accessed 16 Oct. 2023.

(11) “Another Record Year for Film and Television Means Big Gains for Georgians | Georgia Department of Economic Development.” Www.georgia.org, 23 Aug. 2022, http://www.georgia.org/blog/another-record-year-film-and-television-means-big-gains-georgians. Accessed 21 Oct. 2023.

(12) Burkhauser, Richard, and Kevin Corinth. “The Minimum Wage versus the Earned Income Tax Credit for Reducing Poverty.” IZA World of Labor, vol. 153, no. 2054-9571, Sept. 2015, wol.iza.org/articles/minimum-wage-versus-earned-income-tax-credit-for-reducing-poverty/long, https://doi.org/10.15185/izawol.153. Accessed 4 Oct. 2023.

(13) Parys, Sabrina, and Tina Orem. “What Tax Credits Can I Qualify for This Year? A Guide.” NerdWallet, 6 Jan. 2023, http://www.nerdwallet.com/article/taxes/what-tax-credits-can-i-qualify-for. Accessed 16 Oct. 2022. 

(14) Parameshwaran, Shankar. “Why Raising the Minimum Wage Has Short-Term Benefits but Long-Term Costs.” Knowledge at Wharton, 20 June 2023, knowledge.wharton.upenn.edu/article/why-raising-the-minimum-wage-has-short-term-benefits-but-long-term-costs/#:~:text=A%20new%20study%20determines%20that. Accessed 21 Oct. 2023.

(15) Williams, Erica, et al. “State Earned Income Tax Credits and Minimum Wages Work Best Together.” Center on Budget and Policy Priorities, 9 Mar. 2020, http://www.cbpp.org/research/state-budget-and-tax/state-earned-income-tax-credits-and-minimum-wages-work-best-together. Accessed 16 Oct. 2023.