Trump’s tax reform bill and its domino effect on the international market
Art Market | Signed on 22 December 2017, Trump’s tax legislation reform implies numerous micro- and macrœconomic effects. Although the general repercussions are still difficult to predict, they should also affect the art world.
Inspired by the logic of trickle-down economics, which considers that tax breaks benefit the poorer members of society, the new version of the American fiscal system implies a significant tax relief for high-income households, corporations and entrepreneurs. The Art Newspaper details some of its potential effects on the art world and its actors in an article published on 22 December.
When it comes to the art sector, the reduction of tax rates should mainly benefit influential market players. Major auction houses, high-profile galleries and highly paid artists will be favored by the new corporate tax rates (which fell from 35% to 21%) and by the tax rates on individuals with an income superior to $ 500,000 (which fell from 39,6% to 37%).
This will have a direct impact on artwork donations and on public funding for museums. By changing the application conditions for the 40% tax rate on estates (the exemption raised from $ 5,6 million to $ 11,2 million), the reform could dissuade collectors that were incited to donate their artworks to museums in order to reduce the size of their estates for an inheritance. Furthermore, by limiting the possibility of deducting state and local taxes (SALT) from federal income taxes, many American high-tax states such as New York or California might consider cutting their taxes. The consequent decline in public funds could directly affect museums.
Nevertheless, art dealers and art advisory firms could be favored by the new norms on businesses that are set up as “pass through” entities. 20% of their income would be tax-free, and the income tax would only apply beyond the amount of $ 315,000.
While it is difficult to capture the whole extent of these new tax measures, it is highly possible that they will reinforce the United States’ influence on the global art market, especially with respect to China. The new tax law could accentuate the domination of American mega-galleries and high-profile artists, thus confirming the predominant position of actors that already respond to transnational dynamics. The art world and its market appear as soft power tools in the context of a reconfiguration of the global stage.
Publié le 10/01/2018
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