The State of Michigan, one of the hardest hit by the recession primarily due to the slumping auto industry, is in the midst of a political fight over the prospect of charging a 6 percent tax on event tickets.
Gov. Jennifer Granholm, a Democrat, proposed the tax as part of a plan to generate revenue in the upcoming state budget, a move similar to what New York Gov. David Paterson tried earlier in the year. Paterson scrapped the proposal when the state discovered it would receive enough federal stimulus money to help offset its budget deficit.
But, prior to that, Paterson’s plan had already met with resistance from many, and Granholm is facing similar challenges. Michigan is facing a nearly $3 billion state budget deficit, and one of the highest unemployment rates in the U.S.
The fight over the tax appears to be falling along party lines. Republicans control the state Senate and oppose the plan, while Democrats hold the state House and are not ruling it out, according to published reports. Legislators are negotiating over the budget and several different drafts are being discussed. All event tickets – concerts, shows, sporting events and movies – would be taxed under the proposal.
Gov. Granholm’s office did not immediately return a message seeking comment on the status of the proposal. A similar ticket tax was proposed and pulled two years ago due to fierce opposition. The state believes the tax could generate about $100 million in annual revenue; on a $50 ticket, for example, the tax would amount to $3. Michigan is one of the last states that still prohibits the resale of tickets, according to TicketNews’s exclusive Ticket Resale Laws report.
In the middle of the fight is a coalition of citizens and sports teams who have banded together to oppose the plan and launched a Web site called NoTicketTax.com. All four of Detroit’s major professional teams, the Tigers, Red Wings, Lions and Pistons, are part of the coalition against the proposal.
“This tax is not on the sports teams – it is on you – the fans,” the Red Wings said in a recent email sent out to season ticket holders. “And all of us at the Red Wing’s organization believe it is wrong to target the working families.”
Michigan ticket broker Joel Schwartz, owner of Big Time Worldwide vehemently opposes the plan because he believes it potentially would have a devastating effect on ticket sales because many fans would stop buying tickets.
“I don’t think they’re fully aware of the ramifications of this,” Schwartz told TicketNews. “I’ve told the politicians that besides people not buying tickets, this could force ticket brokers out of the state, which would further hurt revenues.”
Schwartz said he would consider moving his business to Ohio if the tax is enacted, because out of state brokers would likely not be subject to collecting it. Brokers in the City of Chicago are faced with a similar disadvantage because of the amusement tax levied by the government.
Michigan attorney Randy Smith, who also owns the ticket resale Web site AmericasTopTickets.com, agreed with Schwartz that ticket sales will decrease, especially in this tough economy.
“Like anything that raises a cost on something, we’ll see people who won’t pay it by not buying tickets,” Smith said. “It gives people an excuse not to buy tickets, which defeats the whole purpose.”