Local Businesses Oppose Tix Tax

July 6, 2007
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GRAND RAPIDS — Probably the only time most business owners have encountered a luxury tax is when they've played Monopoly with their families. But some of them could be having a close encounter of the personal kind with one in a few months, if lawmakers make proposed changes to the state tax structure.

House Speaker Andy Dillon, D-RedfordTownship, said his chamber was looking to raise $1.5 billion in new revenue to fill the projected deficit in the state's general fund for the next fiscal year, which starts on Oct. 1. Part of that plan raises the state's income tax. Another extends the 6 percent sales tax into new areas.

If passed, tickets to sporting events, concerts, shows and movies would be taxed. So would a round of golf, a game of bowling and a health club membership. Adding this tax to those items has been pegged to bring in more than $100 million annually in new revenue to the state. But lawmakers would be hard-pressed to find anyone in those businesses who would praise the levy, called a luxury tax in Lansing

"Speaking from the perspective of minor league sports, we feel that to look to such a community-based industry to try to solve budget woes is probably looking in the wrong direction," said Lew Chamberlin, managing partner of the West Michigan Whitecaps. "They call it a 'luxury tax,' but the ability for working-class folks to take their families out for an activity where they can get in and out for $30 isn't a luxury. That's almost a necessary aspect for a quality of life.

"It would be onerous to have to pass that onto the fans, which we likely would do. I worry about our bottom line because we need to be successful in order to be stable, in order to continue to be part of the community. But I'm more concerned about the effect on the fans and, perhaps, the disenfranchisement that would occur if going to a Whitecaps game would be considered a luxury," he added.

In addition to leading the minor league baseball franchise, Chamberlin is also on the Convention and Arena Authority board that operates Van Andel Arena and DeVos Performance Hall, two venues that host concerts and shows that would be vulnerable to the proposed tax.

CAA Executive Director Rich MacKeigan, who as SMG general manager oversees daily operations at the arena and hall, said the tax could result in fewer concerts playing here and smaller crowds for those that do.

He said artists might skip Michigan for states that don't tax tickets, such as Ohio, Indiana, Illinois and Pennsylvania, or acts could demand more money to cover the tax. Both would make things more difficult financially for the promoters who book them. Tickets prices for the artists who perform here would likely go up, and the effect would likely trickle down.

Higher ticket prices, fewer concerts and fewer concert-goers could result in less revenue for downtown bars, restaurants and hotels.

"We, in West Michigan, have been fighting a bit of an uphill battle," MacKeigan said. "We're in a smaller market. We have a smaller venue. And we're in a state that has a lot of issues, financially and economically. The shows that are touring have options, and Grand Rapids is not the 25th biggest market in the country. So the more obstacles that are placed in front of them, the more likely they are to take their business to neighboring states."

SMG, ticket-seller TicketMaster and concert promoter Live Nation have hired Lansing lobbyist Public Affairs Associates to share their anti-luxury tax message with lawmakers.

Local attorney and CAA board member Gary McInerney is representing PAA on this issue. McInerney & Associates and Seyferth Spaulding Tennyson, both of Grand Rapids, formed an alliance with PAA last month to help clients on matters related to government.

"We're just trying to make sure that our concerns are being heard, and if there are options for either altering or eliminating this, these are explored more thoroughly," said MacKeigan.

A luxury tax would apply to tickets for Grand Rapids Griffins and Rampage games, teams that play at the arena, and to other non-concert events in the building such as monster trucks, bull riding and ice shows. Tickets to events booked by SMG in the DeVos Performance Hall, such as the recent "Comedy Explosion" and the children's show "Thomas the Tank Engine," would also be taxed.

Merchandise and concessions sold at the arena and the performance hall are subject to the existing sales tax. For the first 11 months of this fiscal year, gross concession revenue at the arena totaled $2.9 million, and $174,000 in tax revenue has been returned to the state.

"The state does receive income tax from the performers that are not from here but play here for a night. Whatever revenue they receive here, the income tax from that is remitted back to the state," said MacKeigan.

"So, if one or two, or God forbid, five or six shows end up not playing West Michigan, the state would not see all of that tax opportunity that it is currently seeing, as well as the trickle-down benefit of 8,000 people coming to a concert and going out to dinner beforehand, going out for a drink afterwards, staying at a hotel for a night. Any tax revenues those would incur would also be gone," he added.

A luxury tax wouldn't just affect ticket prices for the Whitecaps, Griffins and Rampage. Boxing at Fifth Third Ballpark, promoted by Whitecaps partner Denny Baxter and Director of New Business Development Dan McCrath, would be taxed. So would racing at Berlin Raceway, the Marne track that is owned by a division of the Whitecaps. 

"There are over 50 raceways in Michigan," Chamberlin said. "I don't think anybody realizes that the vast majority of them are rural dirt tracks. I've got to think that this kind of additional expense-side pressure will put most of them out of business.

"They're operating on a really thin margin. Racing operates on a thin margin anyway because you only go once a week rather than seven times. The additional expense-side pressure of having to fork over 6 percent, or pass it on to your fans, is a lose-lose situation for us."     

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