2009-10-01 / Local & State

Pa. Arts Tax Debate Shows Every Tax Break Matters

By Peter Jackson ASSOCIATED PRESS WRITER

HARRISBURG, Pa. (AP) – Buried deep within the governor’s annual budget – a document the size of a big-city phone book – is an inventory of virtually everything imaginable that Pennsylvania does not tax. Scores of tax credits, deductions, exemptions and exclusions make up the list.

The total exceeds $30 billion a year – more than Pennsylvanians spend to keep their state government operating. Among the tax breaks that each allow $1 billion or more to go uncollected: sales tax exemptions for purchases of home-based health care, hospital care, clothing and most food; income tax exemptions for retirement income and employer contributions to employee benefits; and an inheritance tax exemption for property transferred to spouses.

Far smaller in value are the pair of sales tax exemptions whose proposed elimination were the final pieces of a handshake deal that could end Pennsylvania’s stigma as the last state without a budget. But the effect of repealing any credit, deduction or exemption is the same: it increases someone’s taxes.

The plan to impose the tax – 6 percent in most of the state, more in Philadelphia and Pittsburgh – on the price of admission to performing arts, museums, historical sites, zoos and parks has provoked outsized opposition from advocates for thousands of nonprofit organizations and the corporate owners of the largest venues.

Mitch Swain, chief executive officer of the Greater Pittsburgh Arts Council, said the tax would discourage families from attending performances and exhibits.

“This tax effectively raises our ticket prices at a time when our members are offering discounts and special promotions to be accessible to everyone,’’ said Swain, who was among a group of arts and cultural advocates who lobbied against the proposal at the Capitol this week.

“Disastrous for our business and a disaster for the state,’’ said Peter Luukko, president of Comcast Spectacor, owner of Philadelphia’s Wachovia Center, which has a concert capacity of between 15,000 and 18,000 people.

The plan reflects a hard-won compromise between the Senate GOP majority, whose leaders opposed any broad-based tax increases to combat a recessiondriven multibillion-dollar shortfall, and Democrat Gov. Ed Rendell, who demanded new tax revenue to minimize cuts in education, health care and economic development.

Senate GOP leaders “had this pieced-together revenue package that fell some $120 million short. This is how they chose to fill the $120 million hole,’’ Steven Crawford, the governor’s chief of staff, said Friday.

Architects of the plan said about half that much in taxpayer money currently supports artistic and cultural events and that an unspecified portion of the new revenue would be funneled into a special account to support those activities. The rest of the money would be spent on other programs.

On Friday, a week after the compromise on the nearly $28 billion budget was announced, the details were still being worked out.

Erik Arneson, a spokesman for Senate Majority Leader Dominic Pileggi, R-Delaware, said the arts and cultural exemptions were considered the least distasteful alternative.

Thirty-one other states tax admission tickets for similar events, most of them at the same rate as their sales tax, and the lion’s share of the revenue is expected to come from large concerts where tickets command high prices, Arneson said.

“It’s clear that those kinds of purchases are discretionary,’’ he said.

Senate Republicans were reluctant to eliminate business tax exemptions, since another element of the budget deal calls for temporarily increasing the capital stock and franchise tax, and wanted to preserve exemptions for services that people generally don’t use unless they have no choice.

“Nobody wants to go see a lawyer,’’ he said. “Nobody really wants to see an accountant.’’

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