Despite the Obama administration’s efforts to close the gap between decreasing revenues and increasing expenditures, the federal deficit is expected to soar this year. Congress has been scrambling for ways to find extra dollars and one Congressman believes he’s found a way: tax online music.
It’s no wonder. The number of songs sold online is exploding; early in the year, Apple announced that it had sold more than 6 billion songs on iTunes. Most iTunes are sold for 99 cents each.
The federal proposal would impose a penny tax on all downloaded music in or originating from the US. Ostensibly, this would include all iTunes music since the company is based out of Cupertino, California.
After advising his colleagues to “do the math” (and summoning a page with a calculator), the Congressman noted that, on iTunes music alone, the penny tax would have raised $60 million, roughly the cost of 3 hours worth of funding to AIG (assuming $170 billion bailout over the course of one year).
There was immediate reaction from the music industry, claiming that a tax on music had the potential to suppress sales, including songs with actual merit. As a result of those concerns, an exemption from the tax has been proposed for performers which could prove that either their lyrics or original musical compositions provided “substantial and irreplaceable contributions to the music or art world.”
Performers Britney Spears and Mariah Carey immediately issued statements that they would not seek an exemption. Spears, speaking from her car, said, “I’m just country, y’all. I never meant to do art.” Congress agreed.
Bono, responding to the news, was certain that this was another way that the revenues from his music would avoid taxation. “Wow,” he reacted. “We didn’t even have to move to the Netherlands for this one.” The popular lead singer of the band U2 has faced criticism in recent years for his decision to move the band from Ireland to the Netherlands to avoid paying taxes (he claims that he did it just for the cheese).
Pop icons didn’t rule the day, however. Sen. Robert Byrd (D-WV) proposed an amendment to the bill which would exempt bluegrass and other folk music from the tax. Holding up his own album, US Senator Robert Byrd: Mountain Fiddler (County, 1978), as an example (I’m not making that up – Google it), Byrd noted that there are some classes of “the people’s music” which are in danger of disappearing. Adding a penny tax to tunes downloaded onto an already expensive iPod could make the music unaffordable, he argued. Senators, who remember (perhaps fondly) Byrd occasionally picking up a fiddle in the chambers were sympathetic to his case, but otherwise unmoved.
Noted Sen. Arlen Specter (R-PA), exempting bluegrass music could lead the Senate down the slippery slope of having to carve out other exceptions. He said, “If we exempt one class of music, we’d have to exempt others,” pointing out that the Pennsylvania Polka would not have been saved under Sen. Byrd’s exemption. Specter was immediately criticized by conservatives by invoking a song with the lyrics “Gay with laughter happy as can be, They stop to have a beer.”
Sen. Jim DeMint (R-SC) argued that the bill didn’t go far enough. Taking the floor, he denounced online music as just adding to the entire immoral culture of rock and roll, saying:
“Even if this was not a law… I’m afraid I would have a lot of difficulty endorsing an enterprise which is as fraught with genuine peril as I believe this one to be. Besides the liquor and the drugs which always seem to accompany such an event the thing that distresses me even more… is the spiritual corruption that can be involved. These dances and this kind of music can be destructive, and, uh,… I’m afraid you’re going to find most of the people in our community are gonna agree with me on this.”
Sen. Evan Bayh (D-IN) stopped DeMint before he could go much further, calling him out for quoting the big Reverend Shaw Moore scene from the movie “Footloose.”
Of course, it was not unexpected that Apple voiced one of the loudest objections to the bill, claiming the company was being unfairly targeted simply for being cool. The company also noted that the penny tax would boost the cost of most iTunes to an even dollar, creating a serious shortage in the virtual “take a penny, leave a penny” jar.
Despite the controversy surrounding the bill, a vote is expected to take place later today, on April 1st, otherwise known as April Fool’s Day. Happy April Fool’s Day!
(Photo courtesy of Sig)
In a tough economy – when a state can’t yet pay its bills – you’d think the fiscal plan for the future would be conservative. Not so, North Carolina. Despite massive budget woes, the state legislature has agreed to special tax breaks designed to bring Apple to the Tarheel State.
