Time for a Tune-up of DC’s Tax System

Like cities and states across the country, DC is having a hard time finding enough money in its coffers to maintain the basic services that residents rely upon.  Most recently, every agency was asked to propose 10 percent cuts to their budgets to address another drop in revenues.

While no one likes budget cutting, some policymakers say there is a silver lining to the fiscal crisis – that it’s an opportunity to examine the landscape of city services and do some long-needed pruning.  The Mayor and Council are finding ways to make agencies more efficient, such as eliminating unnecessary expenses and streamlining staffing.

Yet by and large DC leaders have not used the budget crisis as a chance to make the revenue system more modern and efficient.  Parts of DC’s tax system haven’t been looked at for years.  No one has even lifted the hood.

If they did, they would find a lot that needs repairing.  DC’s tax system could be improved in many ways that also would raise revenues at a time when they are desperately needed.

One place to start is to eliminate the special sales tax exemption for theater tickets.  If you go to an event at the Verizon Center or a Nationals game, the ticket sales tax is 10 percent.  Movie tickets are taxed at the basic rate of 5.75 percent.  But people who buy tickets to theater performances – plays, musicals, opera, dance, etc. – don’t pay any sales tax at all.

As a matter of equal tax treatment, the DC sales tax should apply to all ticket sales.  Some will say that this would hurt theaters.  But I would argue just the opposite, that right now theaters are getting an unfair advantage for no clear reason.  If the Verizon Center can thrive with a 10 percent sales tax on tickets, can’t the Kennedy Center, too?

It’s not as if the District doesn’t support the arts.  In the past decade, the city has given a $20 million grant to the Shakespeare Theater Company and a $30 million grant to Arena Stage.  This year’s budget has a $250,000 earmark for the Kennedy Center.  And every theater company in the city is exempt from the property tax. Movie theaters get no such break.

Extending the sales tax to theater tickets would have another advantage – much of the tax would be paid by non-residents who come into the city for a show.   

Stay tuned for more interesting ways to turn DC’s tax system a well-oiled machine.

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