> September 2nd, 2010
Interest, dividends, and other passive types of income comprise the vast majority of U.S.-source income paid to foreign persons that is subject to Form 1042-S reporting. In 2007, foreign persons received $376.6 billion in U.S.-source interest payments, which represent 58.3 percent of total gross income paid. Dividend payments to foreign recipients totaled $134.0 billion (20.7 percent), while notional principal contract income was $68.9 billion (10.7 percent). Finally, payments of rents and royalties, personal services income, and Social Security and railroad retirement benefits combined for $33.0 billion. It is not uncommon for U.S.-source income payments to foreign persons to be entirely exempt from withholding tax. The most frequent reasons for this are that the income is exempt due to a tax treaty between the U.S. and the recipients country of residence, or the specific type of income (typically portfolio interest) is exempt under an Internal Revenue Code section. In 2007, just 10.8 percent ($70 billion) of U.S.-source income paid to foreign persons was subject to withholding tax. Almost $10.2 billion in withholding taxes were collected on the residual income subject to withholding, with an average effective tax rate of 14.5 percent (see Figure A). The average effective rate is substantially less than the 30-percent statutory withholding rate because reduced withholding rates are permitted under many tax treaties. In addition to receiving the most U.S.-source income, corporate recipients were among the biggest beneficiaries of reduced withholding rates, with an average effective tax rate of 12.3 percent. This is due in large part to the fact that corporations received large amounts of dividends and royalties that receive preferential withholding rates under treaty agreements. Conversely, foreign individuals received much of their incomes in the form of Social Security and railroad retirement payments and personal services income, two categories which tend to have withholding rates closer to the statutory level. This resulted in foreign individuals having the highest effective tax rates among the major recipient categories (22.2 percent). Figure B shows six countries whose residents received the largest amounts of U.S.-source gross income during the 3-year period from 2005 to 2007. In 2005 and 2006, residents of the United Kingdom (U.K.) received the most U.S.-source income. However, in 2007, income paid to the U.K. fell to $77.1 billion and was surpassed by the Cayman Islands. Figure B, Part 1 illustrates the steady growth of payments to the Cayman Islands over this period, beginning with $40.1 billion in 2005 (trailing both the U.K. and Japan) and reaching $84.7 billion in 2007. Part 2 of Figure B shows Cayman Islands recipients paid the most tax throughout the 3-year period, and the amount of tax withheld rose at a rate proportionate to the growth in income received over the same period.
Hamiltons McMaster University of the mid-1960s had a thriving campus art scene. The annual arts festival attracted prestigious and daring North American guests, such as Amiri Baraka, Cannonball Adderly, Andy Warhol and the Velvet Underground, and Leslie Fiedler among others. In 1966, mature student John Hofsess, a frequent contributor to the campus newspaper, began to produce 8mm and then 16mm films. Hofsess founded an organization of student filmmakers called the McMaster Film Board (MFB), a group funded by the student union. Hofsesss interests in sexual revolution and American underground art made for a tense relationship between the McMaster Film Board and the student union. Through the McMaster Film Board, John Hofsess began Palace of Pleasure (1966/67), a series of experimental films. Intended as a trilogy, only two parts were completed. The films were designed as showcases for Hofsesss concept of cinematherapy, (1) an experiment that combined ideas from contemporary media–from Warhol and McLuhan–with ideas gleaned from writings on psychoanalytic liberation. His project was similar, if more in spirit than practice, to Wilhelm Reichs orgasm theory, wherein the organism was freed from its neurosis through the total release of dammed-up orgastic energies. Reich envisioned a healthy and functional mankind that could build a sex-positive society away from the tyranny of repressive institutions. Hofsess saw his films operating in opposition to a filmmaker such as Jack Smith (Flaming Creatures), whose shocking work, in Hofsesss estimation, could only reinforce the alienation of the neurotic and their bond to the repressive institution. The ideas underlying the productions were Hofsesss own, but the first part (Redpath 25) was a collaboration between Hofsess, McMaster art community organizer Patricia Murphy, who starred in it, and Robin Hilborn, a science student who applied bleach effects during the films processing. The second and more substantial part of the trilogy (Black Zero) was announced in the student press as being co-directed by McMaster Film Board president Peter Rowe, who was primarily responsible for the cinematography. Hofsess had also cast members of the McMaster Dramatic Society, specifically its director David Martin, who would go on to make a film with the McMaster Film Board titled To Paint the Park (1968), a single-screen experimental narrative that was heavily influenced by Hofsesss work. Martins performance in Black Zero, according to Hofsesss model of therapeutic film form, was “flattened out” in editing. The film was presented in dual projection: tension would dissipate between the two screens. The film acts as a sensual experience by emancipating the viewer from the expectations placed on them by the narrative tradition, their view of the film disrupted by the intentional compromise of performance elements as well as frequent obstructions of kaleidoscopic psychedelic images and appropriated magazine advertisements. Palace of Pleasure is an auteur work, supported through a manifesto that Hofsess contributed to Take One Magazine that expressed his unique aesthetic perspective (”Toward a New Voluptuary: From the Black Zero Notebook”), but it was made with conscious attention to the participation of others, in the spirit of collaborative practice. Hofsess showed a dedication to filmmaking as a social experience, here as well as in his community work as founder of the McMaster Film Board,