PA’s Terrible Ticket Tax: Does the Psychology of Economic Exceptionalism Hurt the Arts?

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MoneyWe’re going to take a little trip today in our time machine. No — no need to buckle your seat belt, it isn’t that long a trip. We’re returning to February, 2009, when New York Governor David Paterson, facing a gargantuan hole in the state budget, seemed open, if relucantly, to imposing draconian revenue-raising measures, including a tax on the price of theater tickets.

The resulting caterwauling among Broadway producers made the rabid town-hall protesters of August look like purring pussycats.

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As the New York Times reported, Gov. Paterson

proposed a 4 percent state tax on commercial theater tickets…an additional 4 percent tax would be automatically imposed by New York City, as well as a 0.375 percent Metropolitan Transportation Authority tax. For a Broadway orchestra seat that goes for $120 – a fairly common price at major productions – the tax would add $10.

According to the Great White Way’s suddenly consumer-conscious sheiks, in economic times more perilous than any since my grandmother, who is nearly 91, was nearly 15, the thought of adding $10 to the cost of a Broadway ticket was unthinkable, not to mention grossly counterproductive. Broadway, they implied, would die! Rocco Landesman, now chairman of the National Endowment of the Arts but then still heading up Jujamcyn Theaters, offered the Times this statement:

“With the ongoing demise of the financial sector, policy makers must fight to nurture and protect industries, such as Broadway, that have been proven to generate tourist dollars.”

“I ask you to also recognize the dire consequences this tax proposal may have on the hard-working men and women employed by Broadway, as well as the thousands of other businesses that rely on Broadway spending.”

I pointed out, however, how facile Broadway producers can be. After all, in January, 2008, when the Broadway stagehands were striking, Landesman participated in a Q&A with the New York Times that included this exchange:

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Q: What was the purpose behind the $20 million strike fund that the producers have been accumulating over the last 4 years? Presumably, it was established to keep the shows running during a strike – which didn’t happen.

A: If all of the producers’ requests had been granted during the IATSE negotiations, resulting in lowering expenses for the producers, would ticket prices have been reduced? They would have stabilized. That in itself is progress.

So, boys and girls, why the trip on the time machine? Because I have consistently suggested that we as a nation have been living in a state of dream-awake, this fallacious notion that we can keep everything as they had been during the good times when we’re in bad times. We can, for example, cut taxes and fight two wars. Indeed, we can cut taxes, fight two wars and not be asked to sacrifice anything else of material value. I have consistently suggested, moreover, that the arts cannot and must not be immune to a coming culture of shared sacrifice and that, in the case of Gov. Paterson’s proposal, this idea that Broadway would collapse under the weight of a ticket tax, when producers continue to rake in millions of dollars in grosses and profits, is a little bit like Warren Buffet balking at buying a new pair of socks. Bottom line: He can afford it. So can Broadway. Which is why, back in February, I wrote:

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When you have Broadway shows with top ticket prices of $100, $110, $120, $130, $200, $300, $400 – depending on the show, the seat and method of purchase/acquisition – for St. Martin to warn that an 8 percent levy “would drive down ticket sales and ultimately lead producers to close some shows” is a little bit like a deaf mute ringing an alarm bell. If people are willing and able to pay $120 a ticket, would $9.60 more really force shows to close? Who honestly believes that?

This brings me to the latest example of the arts clutching to a psychology of economic exceptionalism — and why I question the long-term effectiveness of such an attitude. In Pennsylvania, which has state budget problems not unlike that of New York, a series of targeted taxes are being put into place. These were the opening four graphs of an editorial in the Philadelphia Inquirer:

Filling Pennsylvania’s budget gap with a new tax on the arts unfairly singles out a community that already is struggling.

Gov. Rendell and leaders of the legislature announced late Friday that they finally agreed on a budget for the fiscal year that began July 1. The deal would not raise the personal income tax or the statewide sales tax, but would impose several targeted tax hikes.

One of the proposals, not aired in recent weeks, is to charge a sales tax on tickets at museums and performing-arts theaters. The tax would be 8 percent in the city and 6 percent elsewhere.

It’s not clear whether charging an extra $1.28 would deter the average patron from visiting the Philadelphia Museum of Art – probably not. But many arts organizations are teetering on the edge financially, after a sharp decline in private donations. For some, an increase in ticket prices could become the breaking point.

Now, the Inquirer editorial does make some important points in addition to those above. For example, tickets to arts events will fall under the tax, but not other public events. The Inquirer asks, quite understandably:

….why single out certain types of entertainment without taxing tickets to professional sports events or movies? Probably it’s because pro sports teams and movie-theater operators have more clout in Harrisburg.

And whereas the tax will raise revenue, vague promises to allocate “a portion of the culture tax…to a fund to support arts programs statewide” are disingenuous at best: If the legislative lemmings Harrisburg wanted to devise a dedicated tax for the arts in the Keystone State, it could do so through, well, legislation or referendum. Other cities, notably Denver, have such funding streams already in place, so there are models to study or improve upon. As it appears that the economically stressed Pennsylvania arts community was insufficiently consulted, the situation is salt on an open and festering wound.

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Would it have made a difference — and would the final result have been better, both politically and financially — if Ed Rendell, the governor of Pennsylvania, outlined beforehand why the ticket tax was required in the first place? What if Gov. Rendell had engendered an atmosphere in which shared sacrifice was expected — yes, publicly — of everyone?

In a follow-up story in the Philadelphia Inquirer, the focus is the annual meeting of the Greater Philadelphia Cultural Alliance at the Annenberg Center for the Performing Arts, where much steam, from the likes of Peggy Amsterdam, the leader of the Alliance, as well as other attendees, was directed toward Rendell and the legislators in Harrisburg:

“Your proposal to extend the sales tax to arts and culture activities – a proposal snuck in at the last minute in a backroom deal – attempts to balance the commonwealth’s $28 billion budget on the back of one of its most valuable and vulnerable industries,” Amsterdam said.

“It will price everyday people out of arts experiences, and it will push key cultural institutions to the brink. Yet with as much potential for economic and social damage as this tax threatens, it yields only a paltry one-third of 1 percent impact on state revenues.”

And it’s not as if Rendell doesn’t understand what’s at stake. In another Inquirer piece — the one that broke the story and followed it up — there is this rather astonishing quote:

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A spokesman for Gov. Rendell, Gary Tuma, said he could not confirm specific elements in the budget package. But “we cannot do a budget without pain,” he said, “and there is widespread pain in this budget.”

And this, dear time-travelers, is the point: When economies are as miserable as those we’re living with, there cannot be budgets without pain — without, if you will, sacrifice. It should, however, be a shared sacrifice.

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There is also the question of the degree to which the arts are responsible for the tax itself. Here in New York, certain nonprofits have become so large financially — so wealthy, if you’d like to use the term — that many people question the efficacy of their tax-exempt status. Part of the Pennsylvania legislation may include taxing admission to museums. In a smart think piece on the blog Modern Art Notes, Tyler Green explains that when museums can charge very high fees for admission, in fiscally straightened times it is difficult, if not impossible, for revenue-starved legislators to avoid the imposition of the state’s fair share. To wit:

….the real question is: Why are Pennsylvania institutions facing this now? It’s hard to miss the confluence of the Philadelphia Museum of Art’s outrageous ‘Cezanne and Beyond’ ticket fees and this tax proposal. Extortionately high exhibition charges — the PMA asked a family of four for $88, over $100 with parking — helped create this problem.

Those fees have done two things: First, they say that the museum (and the arts in general) is a place for mostly the wealthy, so why not soak the rich with a sneaky tax no one else will notice or pay? And secondly, if a museum looks like an opportunistic business and if it acts like a greedy price-gouger, how can it be surprised when a local government wants to treat it the way it’s been acting?

Which brings us back to where our time-travel adventure began. Broadway grosses are a hair less than $1 billion a season now. For producers to have claimed, back in February, that a $10 tax on $120 tickets will dissuade attendance and close shows was the very worst kind of, well, lying — or dissembling, if that word seems like condemnation-happy. The citizens of New York State were honestly being asked to believe that a substantial slice of the tens of thousands of people willing to pay $120 for a ticket to Billy Elliotwould be lost because $130 would be out of their reach? It’s more than preposterous, it’s unpatriotic in an atmosphere in which everyone is being asked to give a little. The psychology of economic exceptionalism — “everyone has to give, but not us” — is one of the reasons the arts are looked upon with so little pity, so little sympathy, so little interest by such great swaths of the population. Indeed, for the family of four that couldn’t afford $88 to the Cezanne show in Philadelphia — let alone the parking and the gas and the inevitable food court lunch — there’s little reason to imagine them feeling bad for a tax on those admissions.

Yet, just as George W. Bush did the wrong thing by never capitalizing on the post-Sept. 11 moment to ask for shared sacrifice of all Americans, the governors of New York and Pennsylvania are guilty of fiscal fecklessness — a refusal to look the whole of the citizenry in the eye and deliver the dispiriting diagnosis. Of course Pennsylvania arts advocates are furious: they’re being singled out, one might even say punished, while Joe Six-Pack can treat himself to a terrible movie without coughing any surcharge on his ticket. That’s notshared sacrifice, and by refusing to ask for it, Rendell effectively forces the Pennsylvania arts world to double down on its psychology of economic exceptionalism: “We will not let you pick on us if you’re not picking on everyone else, too.” Clearly, Rendell won’t do that because he perceives the political price to be too high, especially with state Republicans united in their opposition to raising taxes.

Still, when you have political cowardice confronting the arts’ psychology of economic exceptionalism in the public battlefield, both sides lose very badly. Oh, that’s the end of our trip, by the way. Compared to today, February almost seems like a halcyon era, don’t you think?