Movie Ticket Tax Proposed in Colorado

February 11, 2011

A bill has been introduced in the Colorado statehouse that would add a ten cent tax to every movie ticket sold, with the revenue dedicated to an incentive program for promoting film production in Colorado.

There are a few serious problems with this proposal. First, the proposed tax is inaccurately being called a ‘fee.’ A fee is a charge that has the primary purpose of offsetting the cost of a service provided. For example, a charge to enter a state park is properly called a fee because the revenue is used to offset the cost of the park services that the payer is consuming. But the movie ticket charge does not fit into the fee category. While the revenue from the proposed movie charge is dedicated to movie-related purposes (namely, subsidizing in-state productions), it is properly called a tax because the revenue is not used to pay for a service provided by the government. Any assessment that raises money in excess of what is needed to defray costs of a service provided is a tax.

One could argue that the charge pays for the service of encouraging film productions in Colorado, but that argument is weak at best. For one, all tickets would be taxed, but most of those movies would not be made in Colorado, so most moviegoers would not be consuming the service being provided. And it isn’t even clear that subsidizing in-state film productions is a service to moviegoers. Does the average moviegoer really care where a movie was made?

The final obvious problem with the tax is that film subsidies are bad policy in the first place. In the end the real winners are the film makers who get to pad their profit margins at the expense of taxpayers.

The term ‘fee’ is often used to describe proposed taxes because it does not raise the same ire as the word ‘tax’. But as discussed above, the two terms are not interchangeable. In Colorado the distinction has a special significance because the state has a law that requires all tax increases to pass voter approval, but the some requirement does not apply to fees. This often has one side effect of producing lots of tax proposals inaccurately shrouded in the terminology of a fee. The sponsors of the movie ticket tax bill might realize that they are on the losing side of the tax/fee distinction, because according to this Denver Post editorial they are considering asking the legislature to let the voters decide on the tax.


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