The disparate rules that govern capital gains and income tax on the sale of a songwriter’s catalog is due to change. New laws have been passed, that mean that any songwriter wishing to sell a catalog of their work can now do so at the same capital gains rate as their publisher.

Currently when a song is included on a CD or other publication, the writer of that song receives a royalty. This attracts the usual income tax rates that can be as high as 39%. The new bill will not change this. The average songwriter only earns around $5,000 per annum so they are unlikely to be faced with the higher rate anyway. However, a songwriter can choose to sell a catalog of their popular creations to a third party. This means that all royalties are then paid to that party instead of the songwriter in exchange for a reasonable fee. Previously, this had attracted capital gains tax for publishers but the higher income tax rates for songwriters.

While this all sounds positive news for the songwriter, there is as ever some debate over how useful it will be for the average songwriter. It will certainly help the popular songwriter that earns large amounts of royalties because it will reduce the tax they pay by about half. However, a lesser-known songwriter is less likely to sell a catalog of their work. Even if they do, this would not always push them to the highest level of tax.

All in all, the movement is a positive one that looks out for songwriters in preference to labels and producers. However, some songwriters are worried that it will have little or no effect on them if they are not already established with a strong royalty claim.