A look at GCAC’s proposed ticket tax through the lens of economics
Last month, the Greater Columbus Arts Council (GCAC) unfurled a proposal to levy a 7 percent tax on all sports and cultural events in the city. The tax would be used to fund arts groups in the city and provide improvements to Nationwide Arena.
We heard about what local artists think about the proposal in Alive's Sept. 6 cover story, but since this is being partially pitched as an economic development strategy, it's worth evaluating this proposal through an economic lens.
As I said in my column a couple of weeks ago on scooter taxes, there are three major economic justifications for taxes: funding programs with net benefits, reducing inequality and curbing commercial activity with negative social consequences.
The current tax proposal would be an ineffective way to curb commercial activity with negative social consequences. There is little evidence available to demonstrate that art has negative social consequences worth taxing. On the contrary, we tend to think that art enriches the public.
The current tax would also be a weak way to reduce inequality. While the argument can be made that wealthy people spend a larger amount of their budgets on entertainment than low-income people, a tax on entertainment is a much less direct way to tax income than simply … taxing income.
Also, it would be one thing to spend the $14 million in projected revenue on cash transfers to poor city residents or pre-kindergarten slots for low-income families, but instead the money will be spent on arena improvements and grants to other arts organizations. This would not be an especially progressive program.
Ultimately, this program would have to be justified on grounds of economic growth, and the evidence that this proposal will grow the city economy is weak. The main justification GCAC has given for the tax is that the city has less public funds directed towards art than other comparable cities.
In this way, GCAC's strategy to finance public arts subsidies looks a lot like President Trump's strategy to pay off farmers hurt by his trade policies with tariff revenues. Sure, public arts subsidies will help boost the projects that GCAC picks, but if the goal is to increase the amount of art in the city, the better strategy is to not tax it in the first place.
GCAC has said that it explored other revenue options before turning to the ticket tax, including cigarette taxes and property taxes. While cigarette taxes curb negative behaviors and property taxes can help reduce wealth inequality, these options were rejected as not politically expedient.
In the search for politically expedient funding, GCAC has scraped rock bottom. A ticket tax, while maybe more politically palatable than alternatives, would likely reduce the amount of art in the city, even if it were spent on more art. The economics of this proposal simply do not make sense.