The Copyright Tax

Abstract

In 1841, Lord Babington described copyright “as a tax on readers for the purpose of giving a bounty to writers.” In this article, I take that description literally. Treating copyright as a tax-and-subsidy system, I use a novel data set to estimate the amount of the copyright tax and to demonstrate that the copyright tax has increased significantly for books and music with the transition from analog to digital distribution. I then explore who pays it. Finally, I use the rise-and-fall of the sound recording copyright as a natural experiment to explore what, if anything, taxpayers have received in return for paying their copyright taxes. Using a second new data set of stream counts scraped from last.fm for the year-end Hot 100 songs for the last fifty-seven years, I show that in the recording industry, a higher copyright tax-and-subsidy did not give taxpayers more and better music. If anything, it gave them less and worse, ceteris paribus. In other words, I show that copyright is the most pernicious kind of tax. It takes and gives nothing in return.

Keywords: copyright, empirical, law and economics, tax

JEL Classification: K00, D01, D22