Saturday, June 30, 2012
A Fish Story
Once upon a time, there was a small town where the principal economic activity was fishing and the town council only had the ability to impose three taxes: a tax on the sale of fishing bait, a tax on the fish that were caught, and a property tax on the fishing boats that docked at the town. The tax on bait brought in very little revenue while the tax on the fish that were caught brought in quite a bit of revenue. The tax on fishing boats brought in even more revenue.
Foolishly, the town council imposed a high gross receipts tax on selling bait that made it impossible for bait sellers to make any money. As a result, the bait sellers packed up their businesses and left town. Because the fishermen couldn't buy bait, they couldn't catch fish, so the town couldn't collect any fish tax. This went on for a while, and finally the fishermen sailed away in their boats and the town couldn't collect any boat tax either. As a result, the town was broke and the people were unhappy.
Richmond's entertainment sector serves as the city's "bait" to lure customers for goods and services into the city. If the city taxes entertainment in a disproportionate fashion it reduces the incentive for arts entrepreneurs to start small entertainment businesses in Richmond, and particularly the city's blighted core. If there's no show at Centerstage, there's no reason to go to Grace Street. If no one goes to Grace Street, then the restaurants there will serve fewer meals and collect less sales and meals tax. If the restaurants on Grace Street go out of business, then those buildings' real estate value will decline and the city will collect less real estate tax.
If there was a great show at Centerstage almost every night, then crowds of people would be drawn to that part of town. The restaurants on Grace Street would be crowded with customers before and after the show. More meals tax would be collected for the city. Seeing the lines outside the restaurants, entrepeneurs would rush to renovate more buildings and open new restaurants to accommodate the crowds and increased demand. The renovated buildings would be worth more and the amount of real estate tax the city collects would increase. More and more customers from the counties would flock to the city because going to Richmond would be FUN.
Eliminating the Admissions Tax would actually increase the net amount of revenue the City of Richmond collects by boosting the amount of sales tax, meals tax, and real estate tax the city collects. Eliminating the Admissions Tax would encourage the formation of small entertainment businesses that will lure additional customers/consumers in from the counties. These new customers will spend money in Richmond businesses and pay Richmond taxes, then they will go home, imposing little or no financial burden on the city. Putting new businesses into buildings that are vacant will boost the value of the underlying real estate and boost the city's annual real estate tax revenue. Small entertainment businesses will create jobs for Richmond's musicians, actors, and the lower income residents of the city's core--especially entry level "starter" jobs for the city's adolescents.
Right now Richmond is locked into a vicious downward cycle. We are unable to put appropriate businesses into the city core which leads to those buildings standing empty, reduced real estate values (and real estate tax collections), no walkable entry level jobs in the city's core, and general blight and stagnation.
Repealing the Admissions Tax would start a virtuous upwards cycle as small entertainment businesses move into the city's core and renovate vacant buildings and hire employees. These businesses will lure customers in from the counties to see art shows, see live theater, and listen to live music. The will buy arts, meals, and drinks. Many will want to stay the night and will rent hotel rooms. They will pay sales taxes on all of these products and services and the city will see increased collections of these taxes. As buildings are renovated and filled with businesses that are appropriate to the area, their assessed property value will rise dramatically and the city's collections of real estate taxes will also increase.
The time has come--indeed it is long overdue--to repeal the admissions tax.