Shooting Yourself in the Gate

Squeezed by tax limitations and pressured by more people to do more things, government increasingly has looked to special fees and taxes as a way out of the bind. There’s a certain logic to asking the very people who use particular services to pay extra for the things that government does for them. And tacking on a tax du jour here and there masks, for a time at least, the more direct but politically unattractive hit of broad-based tax increases.

Having just gone through the painful experience of raising its utility tax and slashing the budget, Anaheim has raised the Walt Disney Co.’s hackles by floating a proposal for a tax of about 4% on entertainment admission tickets. It would apply also to Anaheim Stadium for California Angels and Los Angeles Rams games, and to movie theaters and other entertainment sites where admission is charged. Clearly, Disneyland would be a major source of revenue under such a tax, a point not lost on its management. Disney is so put off that it has threatened to kill plans for a $3-billion Disneyland expansion that would include a second theme park.

Chalk up some of this haggling to the political hardball the city and Disney have been playing in recent months over who will pay for transportation improvements related to the proposed expansion. But beyond the jockeying between an entertainment giant and its host city, there’s an important regional issue in this debate.

It has to do with the impact of taxation on economic viability. The question, “At what point does taxation kill the Golden Goose?” is vivid in this case because Anaheim has made so much of its name and staked so much of its future on entertainment. Obviously, the city needs the money. But an across-the-board gate tax in a town that lives and dies by its fabled gates risks tinkering with the franchise.

It would be one thing if ticket prices were low. But consider Team Marketing Report’s Fan Cost Index: the Chicago sports-business publication estimates that a Rams game costs a family of four $139.17 for admission and food. The Angels, to pay big salaries to stars on their cellar-dwelling team, had to raise ticket prices. And if you add up the cost of parking, admission, food and souvenirs, Disneyland isn’t cheap either.

Last spring, Los Angeles ducked a showdown over an admissions tax only because the county assessor revised his estimate of property tax revenue upward. But wherever considered, and however appealing at first, a tax at the turnstile is not necessarily the quick and easy answer to what ails local government that its proponents suggest.