Earmarked taxes for the arts

I admit only having been to the airportLast night Mecklenburg County (where Charlotte, NC is) commissioners voted to approve a referendum on increasing the sales tax by a quarter of a cent, some of which would be dedicated to culture: 7.5% of the proceeds to the Arts & Science Council and 5% of the proceeds to the public library.

These earmarked funds for the arts are found across cities and metro areas across the US, sometimes funded by sales taxes (as in Denver or Salt Lake City) but also financed through taxes on motel/hotel stays, property taxes, tobacco taxes (as in metro Cleveland) or license fees.

Are they a good idea? Arts organizations like them because not only does it give a boost to direct arts funding, but also provides more stability to public arts funding than having to go through the city budgeting process on an annual basis. It is that very stability that sometimes worries public budgeting officials – if too much of the tax base is earmarked to one spending line or another, the local government begins to lose flexibility that might be highly valued when economic circumstances change. As they will.

For any city or metro area thinking about adopting an earmarked tax for the arts, here are a few things to think about (before beginning the referendum campaign!):

  • What is it for? Is the goal simply to give a financial boost to an extant arts council, or to fund something new? Is it to expand arts offerings at the community level? Or is it aimed at tourist-friendly cultural organizations? Or is it to fund artistic excellence and experimentation? It’s not good enough to just say ‘the arts should get more funding’, because ultimately it has to be decided, ‘what do we mean by ‘the arts’?’
  • Who is it for? This is a tricky question – most big arts institutions are in cities, but attended by people in neighboring suburban counties as well. Is a tax increase at the city or single-county level best, or should it be multiple counties (as in metro Denver)? When metro Detroit had a (failed) referendum in 2002 on a property tax increase earmarked for the arts, Wayne and Oakland counties were included but neighboring Macomb county was not, causing some conflict.
  • What tax base? Different tax options have different impacts across the income distribution. Given that arts participation skews towards higher income residents, care must be taken to think about whether the revenue source is regressive in its burden (which I why I remain so opposed to lottery revenues as a source of earmarked arts funding). Also note that tax incidence is not simple. Hotel taxes are not simply borne by visitors to the region – if tourism and the convention business are in competition with other places, then some of the hotel taxes are borne by local residents, who will be driven to cut the prices on rooms. It’s not that easy to just get all the funds you need from tourists (if that could work, everybody would do it, eh?).
  • Should it just be for the arts? Science and history museums are typically included in the funding, along with zoos and botanical gardens. The narrower the list of recipient organizations, the smaller the constituency for voting for the tax increase. There is a reason zoos are always included in such funding schemes.
  • Should organizations get guaranteed funds, or must they apply? Large organizations – the big local art museum, opera company, symphony and ballet – will typically want their funding to be automatic, especially if it is known that they would always get funding anyway. But beware of including too many organizations in the ‘automatic’ category: if you want innovation in the arts scene that means encouraging entrepreneurs to set up new ventures, and having most of your arts funding locked up in guaranteed funding to extant firms is not a welcoming environment. A dynamic arts scene means the companies you have now should face the prospect of competition. But be ready for their directors not to agree.

Academic footnote:

I have written about some of this before, so if you really want to get into it…

“Earmarked taxes for the arts: US experience and policy implications” International Journal of Arts Management 6(3) (Spring 2004).

I also did an empirical study of how people voted in that Detroit referendum, not ‘big data’ but some not bad ‘medium-large data’: “Support for earmarked public spending on culture: evidence from a referendum in Metropolitan Detroit” Public Budgeting & Finance 25(4) (Winter 2005).

Will an earmarked tax ‘crowd out’ private donations to the arts? Lauren Schmitz has evidence it will not: “Do cultural tax districts buttress revenue growth for arts organizations?” in M. Rushton (editor) Creative Communities: Art Works in Economic Development (Brookings Institution Press, 2013).


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  1. says

    It would be helpful to have a list of the cities that have ear marked funds for the arts, and some basic numbers for how they have been spent over the last ten years.

    There are 86 cities in Europe with a population of 500,000 or more. About 95% of them have at least one full time, year-round orchestra and opera house. The USA has 71 cities with a population of 500,000 or more. None of them have a full time, year-round opera company. Only 12% have a year-round orchestra.

    To what extent are our cultural policies responsible for these large differences?

  2. Antonio C. Cuyler says

    In comparing cities that have earmarked taxes, I’d also like to know about the citizens’ level of arts engagement, as well as their overall well being.

      • Antonio C. Cuyler says

        Great ideal, Michael!

        I also wonder is there a predictive model in cultural economics that might have helped Detroit anticipate how voting against the earmarked tax would impact their cultural economy?


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