BuckeyeBlog

Two Ohio cities have differing ideas on the proper taxation of entertainment admissions. In Youngstown, the Vindicator reports that “city council on Wednesday will consider reducing the admission tax charged on tickets to events at the [Chevrolet] center from 9.5 percent to 5.5 percent.” This is good news for event organizers, attendees, and perhaps even city government. Youngstown deputy finance director Kyle Miasek correctly notes that attendance will increase due to the lower cost of admission. The Vindicator forgot to take this fact into account in its analysis of the financial effects this measure will have, however:

The 9.5 percent tax generated about $82,000 for the city between February and May, he said. With a 5.5 percent tax during that same time period, the city’s profit would have been about $47,500.

This rudimentary analysis forgets that with a greater turnout, more tickets will be sold. Although the city is taking a smaller slice of the pie, the size of the pie itself has increased. The analysis also forgets that higher attendance means more customers for neighboring businesses and great economic activity in the area. This generates additional tax revenue. There is a chance that city tax revenue could even increase due to this rate cut (Arthur Laffer’s studies come to mind).

Meanwhile, a southern Ohio city has a different admissions tax idea. The Enquirer reports that Kings Island is threatening to jump ship on the city of Mason for its effort to impose an admissions tax:

The possible admissions tax is a 1 to 3 percent increase in ticket prices for local tourist attractions, such as Kings Island and The Beach Waterpark. The fees would help to pay for future multimillion-dollar infrastructure work, including roads around the parks, [Mason Mayor Tom] Grossman said.

“It’s not a threat to them, it’s a benefit to them,” Grossman said.

Kings Island feels that any increase to ticket prices will hurt business, [Kings Island public relations manager Don] Helbig said.

“Anytime we have had an increase in price, we have had a decrease in the number of tickets (sold),” Helbig said. “People are very sensitive about the price.”

Any forward-thinking business should view a potential decrease in sales as a threat, Mayor Grossman. It looks like city of Mason officials need to get a lesson from Youngstown’s deputy finance director.

Tags: rent seeking, Taxes

This entry was posted on Tuesday, July 15th, 2008 at 6:08 pm and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.