Cash-strapped New York State inches toward imposing taxes on event tickets

New York Governor David Patterson is proposing to add a 4 percent sales tax on event tickets in the next fiscal year, a plan that could take hold considering the budget deficit the state government is facing.

And, to add insult to injury, New York City, home to Broadway, is also mulling over including a 4.5 percent tax on tickets on top of the 4 percent Patterson is proposing, raising ticket prices in the country’s largest entertainment market by a combined total of 8.5 percent.

According to the governor’s budget office, New York State is facing a $13.7 billion deficit in next year’s budget, prompting Patterson to take drastic action, including cuts to government services and proposing $3.1 billion in “recurring General Fund revenue” during the 2009-10 fiscal year, which includes the ticket tax.

If the tax is implemented, the state hopes to generate $53 million in 2009-10 and $70 million the following year. The governor’s budget proposal is currently being reviewed by various legislative subcommittees and has not yet been approved. The ticket tax component is being discussed by the New York State Assembly’s Tourism, Arts and Sports Development Committee.

About 18 months ago, former Gov. Eliot Spitzer signed into law one of the nation’s more progressive ticket resale laws that not only legalized scalping but also prohibited sports teams from punishing season ticket holders who wanted to sell their tickets through other channels beyond the team itself.

Ticket brokers and other opponents of the new tax measures argue that raising the cost of tickets, especially during an economic recession, could potentially have disastrous effects on the entertainment and tourism industries in state.

“Historically, we have seen the arts subsidized by the city to make them accessible. This is a huge change in direction which could have a devastating effect on performances coming to New York State,” said broker Jason Berger, managing partner of AllShows.com. “Promoters may not be willing to risk investing on new shows when their average return is less than the tax proposed.”

One of All Show’s specialties is Broadway tickets, and Berger believes the tax would especially hurt the theater district and its ancillary businesses. Berger has visited the Capitol in Albany recently to discuss the matter with legislators.

“Broadway theater is considered to be one of the most popular tourist attractions, as many families plan their trip to New York to see a show. If this tax out-prices them from attending a show, their trip may not take place,” he said. “I believe there are many casualties to this tax, such as hotels, restaurants and taxis, as well as museums and retail shops also losing business. We’ve already seen a drop in the restaurants in the theater district of over 40 percent from the same time last year. I believe this could force many more closings, as well as other lost tax revenue, and shows will play in New Jersey or Connecticut where there is no tax.”