Each policy type listed below exists in many locations throughout the United States to accomplish different goals. The following are common funding strategies used in cities to support arts organizations.

Sales tax
State and local governments collect a large portion of revenue from sales taxes. A sales tax is any tax on the purchase of goods or services. Almost all states collect a sales tax and most tax rates in the United States are between 4 and 7 percent. Additional sales tax policies to benefit arts organizations vary from 1/10 of 1% to 1% in addition to state and lcal tax rates. Sales taxes are set by both state and the local governments, so sales taxes can vary from city to city.

Who pays: Anyone who purchases a good or service will pay the appropriate state and local sales tax rates. The revenue generally goes to fund expenses incurred within the city. This means that visitors will be forced to pay the sales tax.

Why is this important to the Arts: Sales tax revenues generated through local government can be placed in a separate fund and spent on a specific purpose. Art organizations can be allocated funding from the separate fund. Other common uses of these dedicated funds are convention and tourism activities, museums, zoos, libraries, and stadiums.

Pros: Sales taxes have the ability to generate large amounts of revenue. Also, because visitors will pay the tax, they will support the facilities and arts organizations that benefit from the tax.

Cons: Sales tax rates are the same for everyone, which makes them much harder to implement. Also, poor individuals spend a greater percentage of their income and will therefore pay a greater percentage of their income to a sales tax.

Real World Examples:
Denver Narrative
Denver PDF

Hotel tax
Hotel taxes can either be collected by the state or local government. Most often, local governments collect a hotel tax and most of the revenue from the tax goes to fund tourism related projects in the area. Generally, hotel taxes are between 5 and 10 percent, and are applied to the price of a room. This tax is designed to collect money from visitors to pay for tourism-related facilities or promotions.

Why is this important to the Arts: Arts organizations can be considered tourist-oriented cultural activities that draw people to the area. Therefore, under most policies art organizations are eligible to receive funds generated through the tax.

Pros: Since hotel taxes generally tax visitors, it does not significantly increase the tax burden on local citizens. Local citizens can still enjoy the facilities and benefit from the money, while relying on others to pay for it.

Cons: Hotel taxes and other tourist taxes are common. In most cities they are already high and may not generate a large amount of revenue. The revenue from an existing tax may already be pledged for a different purpose.

Real World Examples:
Austin Narrative
Austin PDF

Admission tax
Admission taxes are usually only applied in large cities with large entertainment venues, such as stadiums for professional sports teams. All types of professional entertainment are taxed, though without large stadiums and large attendance, minimal tax revenues will be generated. Admission taxes are collected by local government and typically range from 1 to 5 percent of the ticket price and any surcharges.

Why is this important to the Arts: Admission tax revenues can occasionally be used in similar ways to the hotel and sales taxes to fund arts organizations.

Pros: This tax only burdens individuals who attend professional performances, so not everyone’s tax burden is increased with the passage of an admission tax.

Cons: These taxes usually generate the least amount of revenue.

Real World Examples:
Seattle PDF

Property tax
Local governments collect a large portion of their revenues from property taxes. A property tax is paid once per year and is determined by the market value of a piece of land, including whatever structure is built on it.

Why is this important to the Arts: Property taxes are usually used to fund parks, park districts, libraries, museums, or other facilities in the area. Art organizations can be included and receive funding from property taxes.

Pros: The accessed value of property within a city or county does not vary significantly. Revenue from a property tax is extremely consistent.

Cons: Property taxes only tax those living within the area and do not tax visitors. Someone traveling to attend a performance or view art funded with a property tax doesn't share the burden. Most often this issue is resolved by providing preferential treatment to those property owners paying the tax usually in the form of free or discounted admission.

Real World Examples:
St. Louis Narrative
St. Louis PDF

Other arts policies - "percent for art" policies
Percent for art policies mandate that a certain percentage of the capital budget of publicly financed projects is used for public art. The policy usually requires between 1 and 2 percent of the project budget to be spent on public art. For example, with a percent for art policy of 1%, a city would need to spend $10,000 on public art if it constructed a building costing $1,000,000.

Why is this important to the Arts: Mandating that a portion of the capital budget be dedicated to public art forces art to be incorporated into public facilities for all to enjoy.

Pros: These policies are not taxes and may be more widely accepted by the public. Most often, these policies only require city or county council approval and are easy to implement.

Cons: Whereas the other policies could be used to fund all types of arts organizations, percent for art policies typically only fund public art.

Real World Examples:
Kent, Washington
Allegheny County PDF

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