Tuesday, February 12, 2013

Taxing questions

Can a tax break hook Broadway producers?
Folks have been asking me what I think about the proposed bill to "woo" Broadway try-outs with a tax break.

And I confess my first reaction is:

Aren't we already doing this at the A.R.T.?

I mean, it seems silly to be giving Pippin, or The Donkey Show (of all things!) a financial advantage that we deny to other tourist-trap theatre.

So the answer to the question "Should we cross this particular public policy Rubicon?" is actually "Uh - we're already disembarking on the other side."

Of course, perhaps we shouldn't let everyone get away with what we let Harvard get away with.  After all, Harvard's special.  (For reasons we do not discuss.)

So in the end, I think the bottom line on this particular question is simply, Will it bring additional monies into the state that we otherwise would not collect?

That simple question may not have a simple answer, however - although one basic reply might respond to a more specific query: Will the additional taxes brought in from restaurants, hotels, and the wages of the show's employees exceed the revenue lost by giving the producers the tax break in question?

Even that doesn't quite address the full issue at hand, however, as all sorts of variables are at play here that are hard to quantize.  The first is - If the producers don't bring in the show to begin with, the state gets squat, so the tax bait has to be substantial for the deal to work at all.  But a balancing proviso to that consideration is: When it comes to the size of the tax rebate, we could end up in a "race to the bottom" with competing offers from other states if we seem too eager.  (It's worth noting that Louisiana and Illinois already have similar breaks on the books.)  This perhaps argues for restraint in the first offer we put on the table - we can always up the ante, and sink to the level of Louisiana and Illinois, if we have to.

An economic impact study is in the works, to model the rest of the revenue question.  Just off the top of my head, though, it strikes me that the proposed credit ceiling - 35% of state labor costs, up to a cap of $3 million (with a $10 million ceiling on all theatre tax credits for a single year) is - well, a bit high.  For the state to recoup this on taxes from restaurant receipts, for instance, a show would have to move close to $60 million in meals over ten weeks, which seems to me unlikely - as hard to believe, frankly, as the idea that people would actually journey to Boston and stay in a hotel simply to see a Broadway tryout.

These questions are partly offset, of course, by the fact that such a try-out would create jobs for Massachusetts residents (a telling criticism of the state's tax credit for film production is that most of the created jobs go to out-of-state professionals). I can't argue against that - but I also want to see it in writing: the tax break should only go to labor costs from existing Massachusetts residents who remain in Massachusetts.

To be honest, I'm more skeptical of other aspects of the bill. The Globe reports that in its current form, for instance, it allows theatrical tax credits to be sold off by producers to other bidders. And in a word - WRONG. Epic fail, in fact. If we're interested in stimulating the theatre, there's no reason to allow the resulting tax credits to be traded like party favors.

Another aspect of the bill I have an issue with: it allows similar tax breaks to commercial producers working with non-profit theatres like the Huntington and the A.R.T. And again - this is probably a bad idea.  The A.R.T. is already a lost cause on this score, of course (at least until Diane Paulus is gone); but believe it or not, there are signs that the rest of the nonprofit community is holding out against the temptation of her example.  (So far.)  Let's not make it any harder for them.  Bringing added financial temptations to bear on the sector will only compromise these theatres' missions, and reduce their willingness to engage in risky new work that doesn't fit into a commercial niche.

I should also mention that there's another aspect of this bill (and the whole mindset behind it) that irritates me no end.  In short - who the hell wants Boston to be a Broadway try-out town again?  I mean besides Josiah Spaulding, Jr.?  Not me, that's for sure!  Broadway is all but artistically dead, and New York in general is more and more theatrically moribund, and depends on imports to sustain its national profile; as a friend of mine once put it, "If you can make it there, you've already made it everywhere!" 

Thus Boston's urban theatre community dreams of growing beyond New York's economic shadow forever - our ambition is to join Chicago and Seattle as independent theatrical forces, not to keep paying obeisance to the Great White Way.  So why reify what amounts to an outdated suburban attitude in the tax code?  (With unintended irony, the Globe mentions that thanks to the Louisiana tax credit, New Orleans hosted the Broadway try-out of The Addams Family.  Wow.  I am so jealous.) 

Indeed, why not simply pour $10 million of state money directly into our own arts scene instead of handing it to a gaggle of Broadway producers?  I mean, do people not go out to eat before seeing local shows?

I'd be more intrigued to see the tax credit conceptualized as what it really is - seed money from the state.  Nothing wrong with that, of course - only why not treat it as an actual investment?  This is where I part ways with the likes of Josiah Spaulding, Jr., who seem to imagine that the public coffers should operate as a charity-of-first-resort for their cronies in the private sector.  I've got no issue with investing public money in a private venture, of course - as long as that money is treated as an investment, with a possible return.  In short, if the state invests $3 million in The Addams Family 2, or Tuck Everlasting (which Spaulding is helping put together at the Colonial next summer), it seems to me that it should be treated as any other investor - and should get a return on that $3 million if the show turns a profit in New York.  Indeed, I'd like to see that principle extended throughout the private sector, which depends utterly and completely on innovations and ideas funded by public investment. To my mind, for instance, Apple should be paying a fee on every iPhone to the federal government, which paid for the development of almost all the technology in it.  In fact I'd argue that all university licenses of federally-funded innovation should include at least a 3% return (to beat the inflation rate) to the public.

So I guess what I'm saying is: if you want to talk public investment in the private sector - well, let's talk investment, not charity.  A hand up, not a hand-out.

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