Arts
Tune up DC's tax system: Theater tickets
Like cities and states across the country, DC is having a hard time finding enough money in its coffers to maintain the basic services that residents rely upon. Most recently, every agency was asked to propose 10 percent cuts to their budgets to address another drop in revenues.
While no one likes budget cutting, some policymakers say there is a silver lining to the fiscal crisis — that it's an opportunity to examine the landscape of city services and do some long-needed pruning. The Mayor and Council are finding ways to make agencies more efficient, such as eliminating unnecessary expenses and streamlining staffing.
Yet by and large DC leaders have not used the budget crisis as a chance to make the revenue system more modern and efficient. Parts of DC's tax system haven't been looked at for years. No one has even lifted the hood.
If they did, they would find a lot that needs repairing. DC's tax system could be improved in many ways that also would raise revenues at a time when they are desperately needed.
One place to start is to eliminate the special sales tax exemption for theater tickets. If you go to an event at the Verizon Center or a Nationals game, the ticket sales tax is 10 percent. Movie tickets are taxed at the basic rate of 5.75 percent. But people who buy tickets to theater performances As a matter of equal tax treatment, the DC sales tax should apply to all ticket sales. Some will say that this would hurt theaters. But I would argue just the opposite, that right now theaters are getting an unfair advantage for no clear reason. If the Verizon Center can thrive with a 10 percent sales tax on tickets, can't the Kennedy Center, too?
It's not as if the District doesn't support the arts. In the past decade, the city has given a $20 million grant to the Shakespeare Theater Company and a $30 million grant to Arena Stage. This year's budget has a $250,000 earmark for the Kennedy Center. And every theater company in the city is exempt from the property tax. Movie theaters get no such break.
Extending the sales tax to theater tickets would have another advantage — much of the tax would be paid by non-residents who come into the city for a show.
Stay tuned for more interesting ways to turn DC's tax system a well-oiled machine.
Comments
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by Paul S on Jul 10, 2009 1:21 pm • link • report
by Mark on Jul 10, 2009 1:27 pm • link • report
1. Significantly more people are interested in attending the Verizon Center for events than those interested in theater. Because of this, theater residences are typically smaller venues, and thus there are more of them. Much easier for regional theater companies and symphony halls (eg strathmore) to siphon attendance out of the district. Remember, these people also eat dinner and have drinks before/after, which pours money into the district.
2. Most arts groups are nonprofits to begin with, while Wizards/Caps/Nationals games are there to make money. This is why places like the shakespeare theater and the kennedy center are exempt from paying property taxes, while E street Cinema is not. 100 percent of the ticket you buy to see a show at arena stage goes to support the organization, while revenues from a wizards game eventually makes it back to owners/investors.
3. Theater monies, more or less, stay in the district. You hire local stage hands, props people, sound and light technicians, and many actors who are longtime area residents. So your ticket supports the local economy in many ways. Contrast this to a movie, where money goes to shareholders around the world, actors, producers, and production studios in LA, and elsewhere. Similar situation with professional sports (you think Alex Ovechkin is reading GGW right now?) Without a sales tax, very little money would stay in DC.
4. There are far better ways to raise revenue than by taxing consumers of the arts. For one, we could raise the gas tax or implement some sort of premium usage tax on 395 to deal with rush hour traffic. Or, we could overhaul the byzantine process for establishing new commercial venues in the city (sometimes I think there are twelve different layers of bureacracy you need to go through to open up a sandwich shop!). If we could cut the time it takes to actually open the doors to a new business in this city in half, there would be huge incentives to invest here. I would take it one step further and argue that we should reconsider some of our zoning laws to allow for boutiques, restaurants, small groceries, and the like to occupy currently vacant rowhomes in residential areas.
Sorry, just not a fan.
by JTS on Jul 10, 2009 1:29 pm • link • report
There are MANY useless programs in the DC government which could be eliminated- and Im not talking arts or culture- but what about the silly Marion Barry inspired summer jobs programs that have been so horribly run? What about free parking priviiges for DC city employees- who seldom seem to take transit? Im sure there are many wasteful practices that the city government condones that could be eliminated that would save untold millions. Before we rid ourselves of a wonderful theatre scene which is the envy of many cities, or tax it out to Northern Virginia like we did with our retail department stores and mom & pop stores- we should look more closely at the city government and what can be eliminated.
by w on Jul 10, 2009 1:49 pm • link • report
1)DCÂ’s population has gone from 800,000 to 560,000;
2)DC government has outsourced every possible task - ever see a DDoT employee with a shovel or changing a streetlight bulb;
3)the private sector productivity has doubled (corporations now do twice as much more with the same manpower headcount);
DC government payroll has stayed around 35,000 workers.
ThatÂ’s how inefficient our government is. Granted that some goverment jobs can't be done well with fewer employess such as teaching. But the Dept of Ed certainly has not reduced it's size in accordance to it's shinking and shrunken enollment. Our taxes are high because the government is poorly managed.
by Rob Halligan on Jul 10, 2009 1:49 pm • link • report
by Erica on Jul 10, 2009 1:50 pm • link • report
by Betsy-the-muffin on Jul 10, 2009 2:05 pm • link • report
Oh- BTW- Bens Chili Bowl , which gets it's own property tax breaks every year from DC, opened a profitable concession in the new stadium- how can they be pleading that thier property tax is too much when the have the money to expand their business ???
There is no policy for small businesses in this city and it all depends on whether or not you have friends in the city government who are willing to bend the rules for you.Then you can get all of the breaks you want, at our expense.
Lets suspend all tax increment financing deals for big developers and friends of the city for the foreseeable future.
I bet that would save millions just by itself.
by w on Jul 10, 2009 2:22 pm • link • report
Consolidate the number of social services programs that spend billions of dollars, with few results to show for it?
Eliminate social welfare programs that do nothing more than fostering and supporting a culture of dependency on government handouts?
Stop employing so many useless government employees by hiring more non-union workers?
Oh wait! This is Ed Lazere we're talking about. The answer then is to just raise taxes. My bad.
by Fritz on Jul 10, 2009 2:32 pm • link • report
Nonprofit arts organizations employ a lot of local people from many disciplines at modest wages. People in the theatrical arts are likely to spend their money in the local economy. Where a cinema's costs are largely going to performance rights and prints of films, a local theatre has to buy lumber for sets, pay carpenters, electricians, actors, directors, stage managers, and more. I would be interested to see a breakdown of how much of every dollar spent on a stage play ticket stays in the city as opposed to cinema.
Also, costs of putting on a show are fairly high. But even though high ticket prices are one of the main reasons given for not attending live theatre, ticket receipts are rarely sufficient to cover the full costs. This is why the back page of the handbill for your average play is covered with the names of dozens of donors and benefactors.
There is also an important intangible benefit to having a robust local theatre community. There is a reason people are willing to donate to theatres, but you never see a list of donors to a cinema. Local arts organizations like Arena, Wooly Mammoth, Synetic, and others are a distinctive part of Washington in a way that nationally marketed movies could never be.
Rather than the sales tax exemption being "an unfair advantage for no clear reason," I would say it is an incentive for local business and culture that is provided for a number of very clear reasons.
The economic impact of the expenditures by non-profit arts organizations and their audiences in the Greater Washington Area was over 2 billion dollars in in 2005.
http://www.artsusa.org/pdf/information_services/research/services/economic_impact/aepiii/national_report.pdf
by Nathan on Jul 10, 2009 2:42 pm • link • report
by libra on Jul 10, 2009 2:53 pm • link • report
DC needs to make some cuts. I am a very liberal guy, but I know government waste when I see it. We do not need new taxes, we need some layoffs and streamlining, and fast.
by anonymous on Jul 10, 2009 3:07 pm • link • report
by w on Jul 10, 2009 3:32 pm • link • report
You know, maybe the city could streamline some of its codes for small businesses, and give them a tax break. I think it's outrageous that a small entrepreneur pursuing a dream has to pay the same in taxes as Starbucks, Urban Outfitters, the Gap. You cut the staff because the codes are streamlined and encourage small business at the same time.
by lou on Jul 10, 2009 3:57 pm • link • report
Other then the players and the owners, nearly all of the employees of the professional sports teams live in the DC area and do not make very good wages. The guy taking tickets at a Nats game probably lives in DC and makes slightly more then miniumum wage. The person answering the phones in Daniel Snyder's office doesn't make what Daniel Snyder makes. I know someone who works in the PR department of the one of the local pro teams and she needs a second job on the weekends to help pay the rent.
So in other words, making this out to be "theatre=good local salt of the earth folks" vs "pro sports=evil carpetbagging millionaires" is way off the mark.
Having said that, I don't see how a tax increase on the relatively small number of theatre tickets sold in DC each year would bring in enough revenue to justify the message it would send to the local arts community.
by tivoman on Jul 10, 2009 4:39 pm • link • report
The reason I like the idea is that we should be spending this money (the tax) on the arts. We are spending money on arts and culture, let's recover some of it and/or spend more on the arts and culture, but use the tax monies to support it.
This is related to a point I have made for years that the tourism tax revenue stream should be used not just for the Convention Center and DestinationDC but to pay for the development and operation of other cultural assets which support residents and visitors both.
That being said, you can be in favor of this idea AND in favor of consolidating underfunctioning social service programs (Fritz' point) and in believing that DC Government has too many employees (Rob H.) and may be inefficient and in need of improvement.
As far as the message to the local arts community goes, while it is never enough, DC spends millions on the arts, more than the State of Maryland, I don't know about the State of Virginia.
But it's half-as*ed because it isn't done through a competitive open and transparent process, instead, it's getting an earmark from the Executive Branch or the Council.
It bothers me that there is no setting of priorities and resultant fair decisionmaking process.
We need that too. Pronto.
For people interested in this broad issue, I refer you to this piece from a couple years ago:
http://urbanplacesandspaces.blogspot.com/2007/01/cultural-resources-planning-in-dc-in.html
And interestingly enough, I am speaking next week to a national dramaturgist conference meeting in DC on arts-based revitalization.
by Richard Layman on Jul 10, 2009 5:26 pm • link • report
DC over-regulates & over-taxes local developers & businesses to the point that many activities are no longer viable. Then the government steps in with financing or tax-breaks for favored companies.
We end up with cronyism, white elephants, and missed opportunities. Simplify things and we won't have to pay grocery stores to locate in DC.
by Daniel on Jul 10, 2009 5:42 pm • link • report
Ed Lazere does some great work. If you donÂ’t agree with him on this issue do consider the value of his work in general. (He and I proposed some small business tax RELIEF a few years ago.) I donÂ’t think the BenÂ’s Chili Bowl tax relief program passed.
Citizen rip off of the week - Check Tom SherwoodÂ’s claim in yesterdayÂ’s Current that DC paid the Urban Alliance Foundation $350 for 4 seminars.
@anonymous – In fairness, Boston does have some of the functions DC gov has to perform done by the state of Massachusetts. (MA has a very limited role for its counties). This weakens my argument but thought it ought to be pointed out. Boston isn’t a great example in that it is known to be troubled by corruption (as well). A striking stat is that they have ½ the police DC MPD has (not even considering the 17[?] other police forces DC has).
by Rob Halligan on Jul 10, 2009 6:08 pm • link • report
"[1] As a matter of equal tax treatment, the DC sales tax should apply to all ticket sales.
Some will say that [2] this would hurt theaters.
[3] But I would argue just the opposite,
[4] that right now theaters are getting an unfair advantage for no clear reason."
[1], according to standard economics and in line with basic intuition, will result in theater's closing. that is, the effect of [1] will very likely be [2].
the author claims to refute this likelihood in [3], but then inserts [4], which is a moral claim.
granted, this is a blog post. maybe logic needn't be sound. but the post is also in bad taste, in my opinion. the performing arts are not in the same cultural sphere as sports and movies.
i disagree with the intuition of this post, that somehow performing arts are on equal cultural footing with sports and hollywood movies,
by Tom Buckley on Jul 10, 2009 6:21 pm • link • report
by ksu499 on Jul 10, 2009 6:24 pm • link • report
before this could happen, considerable infrastructure would have to be built, to the point where DC is almost a copenhagen of the western hemisphere. You impose a tax like this on bicyclists today, any sort of forward momentum (no pun intended) wrt increasing the cycling population would be lost. just like highway expansion, the construction of bicycle facilities induces demand. We need a comprehensive network than can encourage and support a large population first.
As for the free riders comment, it is a fair point, but you have to remember that in terms of wear and tear on city streets, there is no contest between bikes and vehicles. This is not to mention that the city already provides ample free parking all over the city, none of which is fully paid for by a vehicle's registration fees.
gas taxes: shaky until congress raises (and then indexes to inflation) the gas tax to sustainable levels. Cars generate revenue through gas taxes, but as evidenced by the looming insolvency of the highway trust fund, they are by no means paying for the streets they drive on, not to mention the numerous externalities - pollution, obesity, military spending - that aren't even in the calculi.
All that said, I'm with you, cyclists should pay taxes to use the road. But as it stands, cyclists are cannibalizing a system that was not designed for them. If you think that cycling is a fundamental aspect of the future of multimodalism in America's urban places, policymakers cannot in good conscience endorse a policy like this until there is adequate demand on the city's resources to do so.
by JTS on Jul 10, 2009 7:00 pm • link • report
They would suggest, and so would I, that we start by stopping the taxpayer subsidized blowjobs procured by our Ward 8 Councilmember.
A few thousand dollars for oral sex is small beans when compared to the hundreds of millions in shortfalls, but DC taxes - especially real estate taxes - are often extortionate and are small business killers. And so long as people see the waste and arrogance of our local public officials, they will be in no mood to pay for such waste, fraud, and abuse.
As far as Ben's, they didn't get a tax "break," they appealed their extortionate real estate tax, which was so high that it added another dollar to every hot dog or chili dog they sold in order just to pay that tax. When Ben's son went public with what they were being assessed, red-faced city officials quickly lowered the assessment.
Rob Halligan is right. Dead right. The District has been a jobs program - especially for residents of Ward 9 (folks who have moved to the 'burbs while still on the payroll). Too many of them do too little of work that would often be best left undone. And the hundreds of millions of subsidies, TIF's, and gifts for the Stadium, Ford's Theater, and other such goodies have led the District down the path to insolvency.
It's about spending, stupid.
by Mike S. on Jul 11, 2009 8:49 am • link • report
The posts about outsourcing are an exaggeration. Dittoprivate sector productivity (deal with a bank or insurance company; it will make DC govt seem blindingly efficient).
by Rich on Jul 11, 2009 12:32 pm • link • report
If your company can not survive so be it, it is not the responsibility of government to keep it afloat no matter what.
I don't care if there local or not if you cant afford to stay in business you should have never started that f**king business.
If consumers like what your offering people will come and if not people wont come.
As an economy goes through problems some business or business segments will fail and if this is one so be it.
If they can not get people to go to the shows they need to add an incentives such as changing the show, a new show, lower ticket prices etc.
by Kk on Jul 11, 2009 5:00 pm • link • report
If the purpose of this blog post is to point out the disparity between ticket taxes, that's fine, but it shouldn't be used as a way to boost revenue.
by Monumentality on Jul 11, 2009 7:20 pm • link • report
The reason why you need a city government, is so that they can look at policy as a whole, as opposed to individual items. If you only act on individual items, and ignore the whole picture, you end up like California, where the people keep voting to spending increases, after forbidding the government to increase taxes.
Personally, I think that taxes should never be earmarked, and be levied as simple as possible. The less rules you make, the less loopholes there are. All the money then goes into the treasury, is added up, and then the government knows how much money it has. Only then, can is decide what to spend it on.
The problem is that the current process is usually backwards. Somebody has a pet project, needs money and then finds a target group that for whatever reason does not get to vote for him/her and then taxes them. That's how you end up with airport taxes, tourist taxes, special taxes on tickets for stadiums, a tax code nobody can motivate, nor understand and loopholes the size of the Mall.
It's wrong wrong wrong.
by Jasper on Jul 12, 2009 11:57 am • link • report
I am starting to think this site should be renamed Greater Greater Washington Taxes, as there isn't a tax/fee they don't support (bag fees, theatre taxes, parking fines). That tax on bikes seemed to be unpopular, though.
by charlie on Jul 13, 2009 10:19 am • link • report
Having worked with a few arts groups in my time, I understand that these are not good times for arts organizations, but I don't think a 5.75% tax on tickets will, by itself, bankrupt any. Arts and other live entertainment organizations have added facility fees, convenience fees, mandatory parking fees, and other surcharges over the past few years with little impact on ticket sales. The revenues from these fees, combined with kickbacks from Ticketmaster and their ilk, offset any loss in actual ticket sales. The reason we have seen so many new fees is because they have far less effect on sales than do the actual admission price. A tax would just be one more add-on.
The following comments are really off-topic, but address responses others have made.
For all of you complaining about over-regulation and red tape, I would challenge you to find a spot in the developed world where there are not complaints about that. The reason these regulations exist is not to make it tougher for people to do business, it's to ensure the businesses are not doing dangerous, hazardous, or illegal things.
My income is just about exactly the median income for Arlington/Howard/Montgomery/Fairfax, and I own a house very near the median home value. My total tax burden (income+sales+property) is lower in DC than they would be in any of those jurisdictions. People think that taxes are lower in the suburbs, but they aren't. Add in that I can walk or take transit to work as well as many outstanding cultural institutions, and I'm way ahead.
For people who claim that there are thousands of DC employees that do nothing all day, why not name agencies and departments that have staff sitting on their hands all day? Anyone can (and many people do) claim there is rampant waste, fraud, and abuse in government, but almost nobody is able to uncover any of it. When someone does, it makes the headlines (e.g., Harriet Waters, Marion Barry). Like Metro crashes, the are rare but get a lot of press when they happen, blowing it out of proportion. In any case, I have seen far larger and more egregious cases in the private sector, some of which were publicly revealed, some of which weren't. Problems the social service agencies stem from underfunding and understaffing, not from idleness.
by Stanton Park on Jul 13, 2009 11:19 am • link • report
by rcarybp on Jul 13, 2009 11:23 am • link • report
My Citizen rip off of the week was overshadowed. The scandal Tom Sherwood pointed out Wednesday was overshadowed by Loose Lips' Thursday Marion Barry earmarking scam. I'm so glad we have CM Evans up there protecting our budget integrity as Finance Committee Chair; one must wonder if CM Evans traded those earmarks to non-existent NGOs for votes for CM Evans' TIFs.
by Rob Halligan on Jul 13, 2009 11:29 am • link • report
The fact that they are a bunch of clown only has to do with the fact that Washingtonians vote for them. You get what you vote for.
@ Stanton: For people who claim that there are thousands of DC employees that do nothing all day, why not name agencies and departments that have staff sitting on their hands all day?First, thank you for agreeing. I love agreement.
Second, it is ironic that those same folks that complain about the government not doing anything tend to also complain that the government makes too many rules, forms, tickets, and taxes. It can't be both. That's about the same logic as a certain Alaskan almost ex-governor attacking Obama for being a socialist, while at the same time touting that the people of her state own all the resources of that state and get paid for them. You can't have both. But some people don't do logic very well.
by Jasper on Jul 13, 2009 4:43 pm • link • report
2: Tax breaks are one of the simplest incentives, with the lightest touch on businesses.
Just as good urban growth patterns should be encouraged, good arts programs should be too.
by цarьchitect on Jul 13, 2009 5:32 pm • link • report
Government subsidized art can be extremely tricky. It's great up until the moment that one person wants to put on a play which frustrates a representative.
Look up the Federal Theater Program.
by MPC on Jul 13, 2009 5:49 pm • link • report
by цarьchitect on Jul 13, 2009 6:26 pm • link • report
I'd prefer the tax code be kept simple and fair.
If a government wants to support someone, they can give a subsidy. This would also force them to motivate it as 'spending' rather than 'reduced income'.
by Jasper on Jul 13, 2009 8:41 pm • link • report
by ah on Jul 13, 2009 9:18 pm • link • report
By the way, why was it that Bernie Madoff got 150 years in jail and yet the mastermind of the $50 million theft from the Finance and Revenue office got only 16?
by Paul on Jul 13, 2009 11:10 pm • link • report
Is a play by a local group art? Yes.
Is a U2 concert art? More difficult. I'd say yes, but I really don't think it needs a 5% discount.
Good Charlotte is a local band. Are they art?
Now the play is on Marrion Barry's secret life. Is it still art? Or political commentary?
How 'bout the Verizon center claiming everything they do is art, because there is song (the National Anthem) before every game?
So, why doesn't the city just put some money aside, with some clear rules on how to apply for it by local groups that actually need some help to stay viable.
@ Paul: Madoff stole $50 BBBBillion. That's a thousand times more than 50 million. What would you like? For Madoff to get 16.000 years (a thousand times more) or for the mastermind to get 1/1000th of 150 years, i.e. roughly two months?
by Jasper on Jul 14, 2009 9:39 am • link • report
All an arts fund does is move the debates about what constitutes good art into another setting, usually one even more ruled by petty political debates. Look at the brutal debates over the NEA in the late 80s, for example. No change, just more opportunities for corruption and more grant writing.
by цarьchitect on Jul 14, 2009 10:11 am • link • report
You may not believe it, but gas taxes, tolls, and fees only cover about 50-55% of the cost of roads. (I have written about this plenty of times. There are many studies, so it is hard to settle on one number. I happen to rely on the work of Martin Wachs: )
Therefore, the rest comes out of general funds monies. These are derived from taxes in general (income, sales, property) which are also paid by nonautomobile owners.
Note that non-automobile owners still benefit from the roads (for transit service, freight delivery, taxis, bicycles, walking, etc.) so it isn't unreasonable to pay something toward the cost--which we do--although it is fair to argue that automobile drivers aren't paying nearly enough, despite their general beliefs that they are.
by Richard Layman on Jul 14, 2009 10:32 am • link • report
by Tom Buckley on Jul 14, 2009 10:34 am • link • report
And what about that Rainy Day fund sitting there with millions in it! Raising taxes for what? It's a rainy day, spend the fund if they are out of money...
by John E. SMith on Jul 15, 2009 9:49 pm • link • report
See:
http://notionscapital.wordpress.com/2009/08/03/dc-council-earmarks/
by Mike Licht on Aug 3, 2009 10:21 pm • link • report
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