WS Journal on Republican ticket tax

As the state legislature heads back in to session on Wednesday, the Winston-Salem Journal follows up on one of the new taxes passed by the Tea Baggers in the last session - the event ticket tax.

Some organizations, such as the Piedmont Opera, won't have to deal with the tax until next year - the tickets for their current season were already sold before the tax went into effect in January. Others - like the River Run Film Festival - have had to raise prices.

Winston-Salem State is lowering prices on football games, hoping to attract more attendees, absorbing the tax into their costs.

What the Journal doesn't tackle is how this might impact struggling local music venues, art-house movie theaters and the like. In January, WRAL noted that some movie goers were balking at the new tax and Wilmington's Star News looked at how the tax would impact attractions like the Battleship North Carolina Memorial.

"It's not welcome, I can tell you that," said Tony Rivenbark, executive director for the Thalian Hall Center for the Performing Arts. "At this point, we don't know how it's going to be enforced."

North Carolina has long charged a 3 percent tax on gross receipts, including ticket sales, Wells noted. This tax dates back to an amusement tax enacted during the Great Depression.

"It basically dried up live theater in the state," Rivenbark said. "That was when the showboats stopped coming along the coast."

Over the years, however, most non-profits had been exempted from the gross receipts tax, Wells said. The new law, however, swept these exemptions away.

Commercial theaters and movie houses already pay the gross receipts tax, but the increase could hurt business, said Russ Nunley, vice president for marketing and communications for Regal Entertainment Group, which operates Wilmington's Mayfaire 16 Cinemas.

"Any time you talk about raising a tax on entertainment, there's going to be an impact," Nunley said.


Horizontal Equity

This is an issue of horizontal equity. Should the same or similar goods and services be taxed in different ways, and if so, how does that influence economic efficiency? Let's say that for whatever reason all fruits costs the same, but apples are taxed at 5 cents an apple and oranges at 10 cents per orange. Under this setup, instead of picking the fruit that gives me the most happiness (utility), I now may pick a fruit based on which is taxed less. This hurts the economy because demand is being artificially shifted to a possibly less efficient use, thus magnifying the adverse impacts of the tax (every tax hurts the economy to some degree) while lowering tax revenues. Making the taxes equal will once again allow the best product to survive.

Keep in mind, apples may have the tax advantage only because some legislator in the 80's used to be an apple farmer. Nonetheless, making the apple tax equal to the orange tax will be seen as a tax increase on the poor apple growers, who will scream bloody murder and hire a lobbyist to keep the pressure on. In sum, its politics that governs the day, rather than sound fiscal policy designed to maximize revenue while minimizing negative externalities.

Here, for some reason, event tickets, aka "apples", have been excluded from sales tax, even though other forms of entertainment, aka "oranges", have not. Increasing the tax base will maximize revenue and increase economic efficiency. Those that stand to lose from the tax change will protest, but those who are now on equal footing will be dancing in the streets. In the end, we'll all benefit from a more efficient allocation of resources.

All events newly subject to this tax

should clearly state to their patrons that their price increase is due to the new sales tax imposed by the NCGA.

"I will have a priority on building relationships with the minority caucus. I want to put substance behind those campaign speeches." -- Thom Tillis, Nov. 5, 2014