Just the Facts: New PA Tax on Cultural Tickets Slams Nonprofit Arts and Culture

Just the Facts
New PA Tax on Cultural Tickets Slams Nonprofit Arts and Culture

Contacts: Julie Hawkins, VP Cultural Policy: 215-399-3512, julieh@philaculture.org
John McInerney, VP Marketing & Communications, 215-399-3515, johnm@philaculture.org

Why Is This Bad Public Policy?

• It simply doesn’t make sense to tax nonprofit organizations, whose mission is about serving the public rather than generating revenue, while many for-profit industries (see list below) remain tax-exempt.    
• A 6% tax on all admissions, tickets, and subscriptions at Pennsylvania’s nonprofit cultural organizations would yield just under $13 million, less than 13% of the total revenue projected. 
• That means that for the sake of $13 million in taxed ticket revenues, this policy will jeopardize $2 billion in economic impact, much of it already producing millions in tax revenues. 
• A reduction in public funding for the arts will likely result in a reduction in cultural education and outreach programming in Pennsylvania’s public schools.
• The cost of this tax is borne by residents and tourists, resulting in fewer tickets purchased, and a subsequent drop in attendance that will have a detrimental effect on restaurants, hotels, and other industries whose livelihood depends on cultural activity.  Tourism is Pennsylvania’s second-largest industry.

 How Does This Tax Unfairly Target Pennsylvania Families?

• Families and people of color are the most engaged segments of the cultural consumer market.
• Two out of every 5 visits to cultural organizations are from children.
• 35,000 school groups visit cultural organizations each year.  Who will pay the tax for them?
• Only 7% of arts audiences are wealthy (total household income >$150,000/year).

What Are Some Other Options for Closing the Gap?

• Smokeless tobacco and other tobacco products: projected to raise at least $50m.  Pennsylvania is the only state in the country that does not tax smokeless tobacco, and polls show 7 out of 10 Pennsylvanians would support a tax on those products.
• Marcellus Shale/natural gas severance tax: projected to raise $100m in the first year, and more than $630m annually by 2014. 
• Air transportation: projected to raise $334m
• Dry-cleaning services: projected to raise $56m
• Catalogs/direct-mail advertising: projected to raise $123m
• Candy and gum: projected to raise $101m
• Business services to buildings and dwellings: projected to raise $89m
• Bottled water and juices: projected to raise $30m
• Spectator sports admissions (excluding schools): projected to raise $60m.  There are no states where the tax on cultural events is higher than the tax on sporting events.

Additional Facts
There are 4,900 nonprofit arts and cultural organizations in Pennsylvania and 86% of these organizations are small, community-based, and volunteer-driven with annual operating budgets of less than $250,000.

A 6% tax on tickets at PA nonprofit cultural orgs would yield only $12.96 million, less than 13% of the total revenue projected by legislators (based on statewide nonprofit ticket sales as reported to the PA Cultural Data Project).

Nonprofit arts and culture activity supports over 60,000 jobs statewide.

Pennsylvania’s 12.4 million residents enjoy 30.6 million visits to arts and cultural organizations every year.

Many arts and cultural organizations are counting on tickets purchased to help fill the gap produced by declining government and philanthropic support.

The average ticket price for an arts organization is $14 and two in five visits are from children.

This tax on tickets could force what the arts and culture industry currently generates downward, and cripple the very source of those revenues.

The new policy unfairly singles out the arts – taxing museums and theaters, but not sports, movies or smokeless tobacco.

Nonprofit cultural organizations are mission based and do not make a profit. They are focused on providing accessible and affordable cultural offerings to the general public. A ticket tax works against the fundamental purpose of these charitable and normally tax-exempt organizations.

Data sources:
Americans for the Arts, Arts and Economic Prosperity III, Pennsylvania State Report, 2007;  Pennsylvania Cultural Data Project figures, analysis by Greater Philadelphia Cultural Alliance. Based on data for the most recent year for which comprehensive data is available for organizations (FY06 or FY07 depending on individual organizations’ fiscal year end);  National Center for Charitable Statistics, current as of July 2009; Greater Philadelphia Cultural Alliance “Tempcheck” survey of arts and cultural organizations, March 2009.;  Greater Philadelphia Cultural Alliance, 2008 Portfolio.