Tax Analysts Blog

Silliest Tax Proposal of the Year -- Really

Posted on Sep 16, 2015

New Jersey is known for bad tax policy. Everyone knows that. Income, sales, and property taxes in the Garden State are badly in need of repair. But if you can believe it, some folks in the state are trying to make its revenue policy even worse.

State Sen. Tom Kean Jr. (R) is proposing a bill (S 2721 ) that would grant income tax exemptions to some entertainers performing in Atlantic City and other New Jersey cities. Now, Atlantic City has hit hard times. Several casinos have closed, and tourism is down. This is partly due to the proliferation of gambling all along the Eastern Seaboard. But Kean's idea represents all that is wrong with the way we approach taxes in America.

Kean wants to exempt A-list performers from income tax. The idea is that these A-listers will be motivated to perform in Atlantic City. They will come and sing and dance more often. And people will flock to the Jersey Shore once more. This is what constitutes economic policy in New Jersey. All the A-list performers must do to escape New Jersey taxation is show up four times a year. And they're not limited to Atlantic City -- they can perform in Camden, Trenton, Newark, or a town called Holmdel. I have never even heard of Holmdel. Wikipedia says it's a town of 15,000 in Monmouth County. I am sure it's a nice town and that Beyoncé and Taylor Swift are dying to play the Holmdel coliseum.

Kean says the Department of the Treasury would provide the details as to how all this would work. My first question is who the heck would be on the A-list? Who would the nice folks at the New Jersey Treasury pick? Perhaps there would be a home-state bias. Frank Sinatra, Frankie Valli, Whitney Houston, Jon Bon Jovi, and Paul Simon were all from Jersey. Southside Johnny of Asbury Juke fame is from New Jersey. And of course Bruce Springsteen hails from the Jersey Shore. Sure, some of those folks are dead or not performing anymore. But commerce clause lawyers should be ready because Kean's bill could result in discrimination against entertainers from Nashville.

What if the A-list performers include foreigners? Suppose Italian crooner Patrizio Buanne made the list. Would providing him a tax break violate WTO rules against tax incentives and trigger an investigation? What happens if folks in New Jersey don't like who is chosen for the A-list? Maybe they won't like country singers, rappers, or death metal bands getting tax expenditures.

The questions are endless. Let's face it. Tax breaks will not save Atlantic City. The casinos that are closing were recipients of tax breaks. It is troubling that politicians look to the tax laws as a panacea for whatever ails society. And the resulting policies are never sound. In this case, the government should never be in the business of deciding who does or doesn't get tax breaks. "Good" singers get the break; "bad" singers don't. Indeed, singers will get breaks, but other professionals won't. The government is no good at picking winners and losers. Kean's proposal is bad tax policy and will not pass. But just the idea that it was proposed by a sitting member of the New Jersey Senate should give everyone pause.

This is an excerpt of an article that first appeared in State Tax Notes.

Read Comments (5)

terSep 15, 2015

Funny cracks about Holmdel but that's the location of the PNC Bank Arts Center,
a large outdoor venue that hosts major performers and can hold about 17,000
people. I agree that this is a dumb policy though.

travis rechSep 16, 2015

I'm sure many of you have had the (dis)pleasure of preparing 28 different
annual state income tax returns simultaneously for clients who are professional
athletes.

Anything to reduce that job would be appreciated!

david brunoriSep 16, 2015

Edmund and Travis, the question of residency for tax purposes presents a
different issue. If NJ said it would not tax anyone who was not a resident that
would be okay (good even). But exempting some while taxing others is terrible.

edmund dantesSep 17, 2015

Ordinary citizens might be surprised to learn that when an out-of-state
resident sings at Atlantic City, that person must pay New Jersey income tax for
the privilege, even if it's only one show. The ordinary citizen might assume
that the singer would report the income and pay the tax to the home state,
where the singer is domiciled. That's the state providing the singer with
government services, so logically that's where the tax payments belong.

Hence, the ordinary citizens might not see this as such a big tax giveaway,
given the thin claim New Jersey has on demanding the income tax in the first
place. The state is already collecting a sales tax on the sale of the tickets,
property taxes on the venue, and income taxes from all the employees necessary
to make the performance possible. Why isn't that enough?

If the singer has been successful, he or she has created a meaningful tax
windfall for New Jersey. Demanding an additional skim from the payment to the
performer is just pure greed.

Stopping greed is not necessarily bad tax policy.

Having said that, no amount of tax tinkering will save Atlantic City.

bob kammanSep 17, 2015

The New Jersey Sales and Use Tax Act imposes a tax on any admission charge to
or for the use of any place of amusement in New Jersey or to any entertainment
event or sporting activity which takes place there. The sales and use tax rate
is currently 7%. So perhaps the objective is to give up some income tax, to
collect more sales tax? The highest New Jersey income tax rate is just under
9%, and the "A List" definition might include only those who would be taxed at
this rate. Doesn't sound like a great trade-off to me, but maybe we should
give some credit for thinking outside the box seats.

According to Wikipedia, PNC Bank Arts Center (originally called Garden State
Arts Center) is a modern amphitheatre located in Holmdel. About 17,500 people
can occupy the amphitheater; there are 7,000 seats and the grass area (may be a
reference to landscaping and not smoking materials) can hold about 10,500
people. Concerts are from May through September featuring 35–45 different
events of many types of musical styles. It is ranked among the top five most
successful amphitheatres in the country. It is one of two major outdoor arenas
in the New York City Metropolitan Area, along with Nikon at Jones Beach
Theater. Like the Nikon theater, the PNC Bank Arts Center is managed by Live
Nation [whose lobbyists are not discussed in the Wikipedia entry].

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