On April 1, Vermont not-for-profit performing arts organizations who sold at least $50,000 in tickets last year will be required to collect a new 6% sales tax from their patrons. Efforts to repeal the tax (enacted as part of the omnibus Miscellaneous Tax Bill at the very end of the 2010 session) have been met with quiet certainty in the Legislature and in the Administration that those efforts will fail.
The harsh reality is that the State is looking for revenue under every rock, stone, pebble, and, in this case, grain of sand.
On the surface it seems reasonable to ask whether a patron paying $20, $50, or sometimes even $100 shouldn’t be asked to pony up an additional $1.20, $3, or $6. If one can afford $100, surely one can afford $106, right? For probably 99% of all patrons (including me and members of the Legislature) this statement is true.
But what about the other 1%? What about the patron who scrimps and saves every penny to be able to afford the good seats so that his/her family can see their first Nutcracker up close? The reality is that for this person, the decision will be either to not go at all or, at best, to drop down to the next most expensive category of seats. The result? The organization loses that income completely, or the difference between the higher and lower ticket price. Multiply those few patron-decisions times the number of events in a typical season and the lost revenue quickly climbs into the thousands of dollars.
Again, no big deal right? Well, on this there is a huge divergence of opinion. On one side (generally populated by people who have never managed a not-for-profit) the response is “Yeah, no big deal—what’s a few thousand bucks to an organization that’s bringing in $50,000 or more in a single year in ticket sales?” On the other side are the arts professionals who have done their homework and know exactly what their “price points” are for any given production. Furthermore, they know that even if they sell out every seat in the house, on average, the income from ticket sales will generate only about 35% of the costs needed to present the artist(s) in their seasons. “A few thousand bucks” is frequently the difference between solvency and insolvency. At the very least it's a few thousand bucks that has to be raised instead of earned.
What if there were a better way?
If the Administration and the Legislature are truly looking for more revenue, rather than tax patrons at the box office (which everyone in state government understands may increase current revenues from the sector by about $400,000), they should help the not-for-profit arts sector do the one thing that it has never been able to do for itself—market and promote the extraordinary programs available across the state to the millions of potential “cultural tourists” that live in Boston, Hartford/Springfield, New York, Philadelphia, Albany, Montreal, and Quebec.
Here’s why: with NO statewide, coordinated marketing and promotional activity across the sector EVER, this sector nevertheless contributes nearly $19.5 million each year in state and local tax revenues (not to mention all the other public benefits). Heck, it works for the ski industry, doesn't it? Imagine what the arts sector will contribute once a little grease starts oiling its promotional wheels?
Taxing patrons will hurt the sector. Spending a little bit on marketing will strengthen the sector and vastly increase state and local tax revenues. We've already started and we have the baseline information to compare our efforts to, thanks to Doug Hoffer and Melinda Moulton. Let's keep it going.