Apparently, high taxes can make for better films. How is that supposed to work? It has to do with the fees of the stars. Salaries in Hollywood are high: actor Dwayne Johnson earned about $87.5 million in 2020, Ryan Reynolds $71.5 million and Jennifer Lopez $47.5 million, it is estimated Forbes Magazine. And just as unimaginably high as these sums are the taxes that the movie stars have to pay. With their salaries, they potentially belong to the highest tax bracket. The actors and actresses want to avoid them as much as possible. That’s why they set clear priorities when deciding which films they want to be in.
A pattern emerges: Above all, high-quality films are accepted, which are paid less, but can increase the prestige of the actors. The stars, on the other hand, apparently regard lucrative blockbusters as their financial ruin. This shows a piece of paper two economists from Louisiana State University, with whom the researchers put the taxation of Hollywood stars up for discussion.
The authors actually wanted to find out whether high taxes for the rich reduce their incentive to work. To do this, they analyzed data on labor supply from 1927 to 2014 and combined this with data on tax rates in high tax brackets. The researchers used reviews, user ratings and a list of “important classic and contemporary films” from the Criterion Collection to determine whether a film is better or worse. Actor data is particularly well documented. You can now find every film and every fee on the Internet Movie Database platform. Movie stars are among the highest-earning employees, and they notice changes in the top tax rates immediately.
“High-earning artists prefer quality.”
The result of the study was unexpected: higher taxes tended to ensure that there were better films. “This pattern suggests that high taxes mean that high-earning artists prefer quality,” the authors write. Movie stars seem to use the high taxes as an incentive to establish a reputation as a “quality” artist. But the pattern was also evident among actors in supporting roles who earned less.
This ties in with stories that Hollywood stars have been telling for a long time. “When I was in the film industry, every year I got to the point where I hit 90 percent (top tax rate at the time, ed.) after the second film, so I didn’t do any more films that year wanted to do more. And it wasn’t just me,” the researchers quote former American President and actor Ronald Reagan as saying.
George Clooney chose a different path in 2005. With the film “Good Night, and Good Luck” he earned just three dollars. He wrote the screenplay, directed and played the lead role. The work paid off, and the film was later nominated for six Oscars. Actor Jonah Hill followed suit. For his role in Academy Award-winning director Martin Scorsese’s “The Wolf of Wall Street,” Hill accepted the American Union for Film and TV Actors’ minimum wage of $60,000. The film was nominated for five Oscars, including Best Supporting Actor.
The research paper cannot answer whether the connection between award-winning films and low salaries is actually due to taxes. But with these salaries you can probably afford to often act in the films that give you a good reputation and otherwise tend to stay away from the screen. After all, a rare appearance promotes the star cult even more.