Drawing a Blank: Why Is Congress Going to Reward Wealthy Artists?

Right now, while everyone in social media is arguing over other things, a horrible little law is making its way through Congress which you ought to be aware of – if you happen to love art and care about capitalism, as I do.

The Art Newspaper reports today that a bill known as “The American Royalties Too Act” or “A.R.T.”, has gained six co-sponsors over the last three weeks.  The bill would impose a resale royalty on works of art meeting certain sales criteria, and is modeled after a European concept known as “droit de suite”.  Since my time at Sotheby’s Institute back in graduate school, the concept of droit de suite has struck me as both nonsensical and typical of those who, in order to solve a perceived problem, decide to create another one.  I’ve warned about it on the blog before, as you can read here.

The wincingly awful use of the word, “Too”, aside, here’s what I promise you will happen over the next decade, if this “A.R.T.” bill passes:

1. The law will do little or nothing to aid most artists – and may actually hurt them.

In theory, this law is designed to protect struggling, up-and-coming artists.  As Christopher Rauschenberg, son of the late artist Robert Rauschenberg wrote on HuffPo yesterday, those pushing this legislation believe we “should foster and support young artists if we want them to continue to create. Implementing legislation that equitably distributes the proceeds of creative output will cost taxpayers absolutely nothing, yet would mean a great deal to the artistic community.”  [Helpful hint: any time you read the words, “equitable distribution” as a justification for anything, raise an eyebrow.]

In reality, if passed this law will largely operate for the benefit of already wealthy artists, their foundations, or their estates, such as that of Mr. Rauschenberg, by pouring additional thousands of dollars into their coffers every time a work of theirs is sold for up to 70 years after their death.  At the same time, with a resale payment tacked onto every sale, those artists who are not already household names will find that prices for their work will remain artificially depressed, keeping sales turnovers of their work low.  Most artists, in fact, never see their work come up for auction at any of the big auction houses, and this law will do nothing to encourage that to change.

2.  The law will turn out to be a great tax-raising scheme.

While the law appears on the surface to be designed to help the poor and struggling artist, what is lost in the emotional component of the argument being made largely by those on the left – natch – is the fact that this is not free money, nor an act of beneficence on the part of Congress.

For royalty payments, you see, whether from sales or licensing of intellectual property, constitute taxable income.  What Congress is proposing is really a way of imposing an additional income tax, without actually calling it that.  The royalty payment will be taken by the auction house at the time of sale, and then the artist or his estate will be sent these payments, quarterly.  Once that royalty payment makes it to the end point – the artist or his estate – the government can tax that income.  So in truth, this is a way of squeezing art buyers out of just that little bit more of their money, even though the collection of said money will take place at a different end of the revenue stream.

3. The law will cause the market for Modern and Contemporary Art sales to shift away from the U.S.

Decades ago, Paris lost its primacy in both art gallery and art auction sales to London, in part because of the passage of draconian French laws regarding droit de suite and other forms of taxation.  Over the past fifteen years however, and particularly after Britain adopted EU regulations, the center of the international art market has shifted from London to New York.   With the implementation of this proposed A.R.T. Act, sellers are going to be faced with paying royalties – up to a cap of $35,000, depending on the resale price – on every piece of art falling under the protection of the law that is sold: a cost which they will pass along to the buyers.

Now yes, plenty of high-value auctions still take place in London today, and if this law passes they will still take place in New York, as well.  However over time, markets tend to seek environments where they experience the fewest restrictions on their ability to engage in commerce, which is why sales at Sotheby’s in New York eclipsed those of the home office in London years ago, and also why the socks you are wearing right now were probably not made in America.  If Europe suddenly became a (comparatively) cheaper place than the U.S. to engage in the art trade, the bulk of the buying and selling in the Modern and Contemporary art market could easily shift back to London.  Rather than making things better for everyone, Congress could actually be making everything worse.

4.  Is this bill really about achieving fairness? For whom?

In defense of this bill, co-sponsor Congressman Jerrold Nadler (D-NY) recently told The New York Times that, “To me, the bill is a question of fundamental fairness.”  However under scrutiny, this moral argument falls to pieces in the face of reality.  Under the European version of this law one of the wealthiest artists in the world, Pablo Picasso, is still collecting droit de suite payments – or rather, his already very wealthy children are, because he’s been dead since 1973.  Does that seem, on a common-sense basis, to be “fair”?

What about a living, wealthy American artist, such as Jeff Koons, who will directly benefit from the American version of this law?  Koons makes millions of dollars in commissions for creating things such as giant topiary puppies.  Is he so disadvantaged that getting a check for $35,000 every time some subsequent purchaser buys one of his sculptures, such as his metallic balloon animals, will “fundamentally” address a wrong done to him in some way?

By way of conclusion, I would point out that readers are of course most welcome to disagree with anything I’ve written in the comment section of this post, as indeed you always are.  Yet it seems to me that, from a purely rational, analytical point of view, one cannot deny the fact that those who will benefit most from the passage of this law are wealthy artists, and the government.  Little or any benefit will be shown to accrue to the group of individuals which the A.R.T. Act was allegedly designed to help, but Congress will once again have found a clever way to tax American business while wrapping itself in a cloak of moral superiority.

Detail of "Elevation of the Dome of the U.S. Capitol" by Thomas Walter (1859) Library of Congress

Detail of “Elevation of the Dome of the U.S. Capitol” by Thomas Walter (1859)
Library of Congress, Washington D.C.

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