Artists cry foul
BRATTLEBORO -- A new sales tax on the performing arts will cut into the already slim margins of non-profit art organizations, according to supporters of the groups across the state.
Last year, in the final days of the Legislative session, lawmakers introduced a provision in the massive Miscellaneous Tax Bill that created a new 6 percent sales tax on all performances for non-profit groups that take in more than $50,000 in ticket sales annually.
The provision was introduced with little opposition and very few art directors were even aware of the new tax.
Now, with the law set to go into effect on April 1, groups are trying to rally support to repeal the law, though it appears that time is running out.
About 30 organizations across the state will have to pay the tax this year, based on last year’s sales, including the New England Youth Theatre in Brattleboro.
NEYT Board President Bari Shamas said that even though she appreciates the state’s tough financial situation, taxing non-profit art organizations is not the way to help close the budget deficit.
"We’re getting squeezed on both sides," she said. "There is less federal money and now we have this. A small group like New England Youth Theatre can’t absorb it."
Other Windham County organizations that will be hit with the new tax include The Marlboro Music Festival, The Yellow Barn Music Festival and the Brattleboro Music Center.
Shamas said it is part of the New England Youth Theatre’s mission to make sure any child can attend classes and take part in productions.
Those families who rely on NEYT scholarships will have to pay the extra tax, which, for some families, could be the difference between attending a production or staying at home.
And fewer people walking to a NEYT show means fewer sales in area restaurants and stores.
"It doesn’t seem to make sense," she said. "Any sales tax usually hurts low-income people the most and the state is trying to balance its budget on the backs of the people who can afford it the least."
The entertainment tax issue came to light a few years ago after the Vermont Department of Taxes audited a handful of larger non-profit performing art groups in central and northern Vermont.
The audit found that the groups were putting on large shows with internationally known acts but not paying any sales tax on the ticket sales.
The new tax was introduced in the closing days of the 2010 session.
A bill, H.137, was introduced this year to repeal the measure, but House Ways and Means member Oliver Olsen, R-Jamaica, said Gov. Peter Shumlin made it clear that he was not going to support it.
Olsen, whose district includes the popular Weston Playhouse, is opposed to the new tax.
But he said that without the governor’s support, there is little chance that the bill will advance this year.
"Having $50,000 is a low threshold but it has an impact on a lot of organizations," said Olsen. "These groups are trying to keep their ticket prices low so people can attend and this tax will put those prices that much more out of reach for some people."
Olsen said earlier in this session it appeared as though H.137 was going to pass before Shumlin made it clear that he would not support the repeal.
Shumlin, who was president of the Senate last year when the law was enacted, on Monday said that the $50,000 threshold should shield smaller organizations from the tax.
And he said with the challenge facing the state to bridge the budget deficit, every dollar will be needed to avoid additional cuts down the road.
"We are not able to support H.137 due to the cost of its implementation," Shumlin said. "The estimate of lost revenues from the bill is $700,000 or more per year. This is one of the difficult choices we have been required to make to close a $176 million budget shortfall in the coming fiscal year and prepare for further cutbacks in federal revenue that are certain to be coming our way."
Alex Aldrich, executive director of the Vermont Arts Council, said lawmakers pushed the provision through last year without really giving it enough thought.
Non-profit groups, he said, generally cover only 30 to 40 percent of their costs with ticket prices with the remaining money coming from grants and donations.
He said it was not fair to tax them on 100 percent of their sales.
"Every nonprofit has a larger mission and they do not exist to make money," he said. "There are no media moguls being made here."
Aldrich also said the tax could have the effect of stifling growth at a time when the state should be helping businesses.
If groups are approaching the $50,000 threshold, he said, they might decide to pull back to avoid paying the tax which would have to be added to the ticket price.
"I’ve never heard anyone say that a higher tax encourages more sales and gets people to go out and buy more," said Aldrich. "There was no thorough discussion and once it was included in the bill, there was no way to get it out."
According to estimates made by the Vermont Arts Council, the new tax will only raise about $650,000 this year, which is less than one-tenth of 1 percent of the general budget.
But those are real dollars to nonprofits that barely get by year after year.
"Most people don’t realize how razor thin the profit margins are for nonprofits," Aldrich said. "If four or five people don’t come a night, and they lose a couple of hundred dollars each performance, it starts to add up."
Howard Weiss-Tisman can be reached at email@example.com or 802-254-2311, ext. 279.
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