Thursday, March 27, 2008

Paying taxes with art...

Currently there is a problem with the U.S. tax system. A collector can donate one of their art pieces to a museum and receive a nice tax deduction for the gift, while an artist cannot do the same. The difference is this, the artist (we are talking established artists with a clear market value for their work) that gives an original work to the non-profit art center of their choice would only receive a deduction based on the cost of the materials used in making the work, while the collector can deduct the full market value of the work donated.

Currently artists are not being recognized as a business that adds value to raw materials in the tax code as far a deductions. A bakery that gives away cookies to a homeless shelter can take a full value deduction but not artists. And if your art is a ladybug in a Styrofoam cup then you are out of luck.

In comes Senators Robert Bennett and Patrick Leahy. For years now they have been kicking around Artists' Fair-Market Value Deduction Bills. There is a summary and history on the Americans For The Arts website.

There is also an brief interview with Senator Patrick Leahy on NPR's All Things Considered about this issue.

I am curious to hear how this develops.

So why is this relevant to a consideration of value? What does it matter if the government acknowledges the value of an art work? Can't we trust the marketplace in this matter?

The issue here is not just one of fairness within the legal system but also one of definition of value.

Clearly artist's add value to materials with their time, skill and knowledge, but how do you measure it?

If the production of an artist, who has been verified in the past by the market as a viable business, is unable to get an acknowledgement of fair market value for their work from the government, then either the government or the market is mispricing real goods and distorting reality.

Which is it?

And whoever is in the wrong here, whether market or government, can we trust their capacity to properly value other real goods like food, oil, or consumer goods?

This gap is created by concern that people might interpret the definition of art in a way that allows them to dodge taxes, but that is the problem isn't it - that is difficult to pin down the value of an artwork because much of an artwork's value lies in it openness to interpretation.

Perhaps a better question is: does the government or the market misprice art less?

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