Superheroes of Tax
Ernie Neve, CPA
May 1, 2019
Last weekend, Hollywood made history. Disney's three-hour popcorn epic, Avengers: Endgamesent box-office records scrambling in panic, grossing $350 million here in the U.S. And $330 million in China. And $600 million more in another 43 countries. It's the first movie to top a billion dollars in its opening weekend. Endgame still has a long way to go before it catches Gone With the Wind, which made $3.4 billion in inflation-adjusted dollars. But did Scarlett O'Hara gross a single dollar in action figures, video games, or happy meals?
This isn't going to be one of those stories where we say, "Hey, let's look at taxes in the Marvel Universe!" We have no idea how payroll works in Wakanda. We couldn't tell you the first thing about import duties on Vibranium. And we don't really care if Thanos of Titan is reporting all his income to the proper taxing authorities. (He's not our client!)
Surely, though, there were plenty of tax collectors in the audience swelling this weekend's box-office gross. And they should be as happy as anyone, because they'll be claiming a pretty nice share of it all!
Start with the real stars of the movie. We're talking about the CGI artists who generated over 3,000 visual effects shots. (Director James Cameron's company even created an entirely new facial-capture application called Masquerade specifically for James Brolin to play Thanos.) VFX work is time and labor intensive, so most of that budget goes to the animators, directors, and other technicians who work behind the scenes to make the magic happen. Much of that money, in turn, finds its way into Uncle Sam's pocket, and far faster than it takes Thor to find his way back from Asgar.
Unfortunately, producers were forced to hire pricey people for situations like "dialogue" and "character" where special effects wouldn't cut it. Robert Downey, Jr., who earned just $500,000 for his first Iron Man movie, will take home north of $50 million. Middle-tier stars like Chris Evans, Chris Hemsworth, and Scarlett Johansson earned a reported $15 million each. All of that is taxed as ordinary income, with 37% going to Uncle Sam, 3.8% going to Social Security and Medicare, and 13% going to California.
Disney spent $356 million to make the movie, along with millions more to market and promote it. In Hollywood, the accountants are nearly as creative as the directors and writers, so the studios usually find a way to show a loss. But $1.2 billion in a single weekend may be a little harder to defeat than the usual gross, and if Endgame does show a profit, the studio will pay the usual 21% corporate tax.
At the end of the last Avengers movie, Thanos collected all six of the Infinity Stones and snapped his fingers to wipe out half the Universe's population. (Not a spoiler . . . you've had time!) Google celebrates that moment today with a Thanos "Easter Egg." Just go to Google, type "Thanos" in the search bar, and hit "enter." Then look for the jewel-covered glove, called the Infinity Gauntlet, in the upper-right corner. Click it, and you'll see half the search results magically disappear from the page.
But . . . and we're just spitballing here . . . what if you could "Thanos snap" your fingers and make half your taxes go away? Well, we may not have any Infinity Stones in our pockets. But we do have an ensemble cast of concepts and strategies to put to work to help you pay less. A captive insurance company can be every bit as good as the Power Stone, for the right business, and a charitable remainder trust can be as illuminating as the Soul Stone. So call us after the movie lets out, and take a look at our special effects!