The Biden Administration is proposing a large tax increase on American corporations, resulting in a 7% increase in corporate tax expenditures if passed. Already we’re hearing that entertainment companies may look at opportunities to pass that increased operating cost onto consumers. Sources say that while changes are unlikely to manifest over the next few months, corporations like The Walt Disney Company, Netflix, and others, may gradually increase cumulative offering prices by a commensurate amount to offset rising costs.
The current cost of Disney+ for an annual subscription is approximately $80.00. If Disney passes the 7% increase in corporate tax rates onto their Disney+ subscribers, the Disney+ rate would rise to $85.60. This is not including potential further increases in Disney+ rates that we expect regardless of tax increases. For Netflix, the potential rise would go from approximately $216.00 per year for a Premium Account to $231.60. Remember, however, that corporations are likely to distribute any increases across various services they provide in non-uniform manners as they assess consumer demand, as well as competitive factors in the marketplace. It’s unclear if American corporations would raise international services in response, or to what degree.
The Biden Administration is likewise looking to greatly increase the capital gains tax for individuals and couples making more than a million dollars annually. These taxes are less likely to result in any corporate increases in price per service, as these taxes will hit upper class members of management, as well as mega-rich actors and wealthy company investors. While these taxes will certainly generate additional revenue for the US government, they’re more difficult to trace to potential consumer cost increases in the entertainment sector.
One of our greatest concerns might be for entertainment companies that have been ravaged by the pandemic, and are now potentially facing a raise in their taxation. For those companies, the free market would suggest they need to offer bargain prices to draw consumers back into the industry. But with taxes potentially rising, those same corporations will have difficulty keeping prices where they are, little alone being able to drop them. You can imagine that movie theaters may actually have to increase ticket prices over time, while ironically needing to lower tickets to draw in wary moviegoers.
While very large and cash-flushed corporations may be able to absorb some of these costs without immediately passing on costs, smaller entertainment companies could be stuck in a hard squeeze without the capital reserves to weather the double whammy of pandemic and tax increase. Smaller cruise lines and theme park companies, for example, could find themselves in a difficult position while mega corporations hold out via liquidity until their smaller competitors are made less competitive. It would appear objectively true that Wall Street had major advantages imposed by the government over Main Street in the past year, and it’s probably wise to see smaller companies and corporations protected.
Our goal in this article is not to take a stance on a potential tax increase on corporations in the United States. It may very well be a necessary action to take, or it might be a wrong path for the government. Rather than taking a position, our goal is simply to reflect how this increase is likely to be passed onto consumers through increased prices, while at the same time being better absorbed by larger corporations with stronger reserves. It’s a small part in a much broader conversation about taxes, profits, and government spending.
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Pirates & Princesses (PNP) is an independent, opinionated fan-powered news blog that covers Disney and Universal Theme Parks, Themed Entertainment and related Pop Culture from a consumer's point of view. Opinions expressed by our contributors do not necessarily reflect the views of PNP, its editors, affiliates, sponsors or advertisers. PNP is an unofficial news source and has no connection to The Walt Disney Company, NBCUniversal or any other company that we may cover.