That is, unless you live right next door.
And that’s the issue. For many fast-growing cities that attract young populations such as Seattle, San Francisco, New York, and others. Music venues are part of the cultural fabric that help make these cities desirable destinations for young, upwardly-mobile professionals. But they’re also viewed as neighborhood nuisances that people don’t want to live near.
For many people who open music venues, they are not doing so entirely for profit-motivated reasons. “It doesn’t make anybody rich owning a club in Seattle,” says Pete Sikov, the owner of Seattle’s El Corazon, told The Seattle Times. There’s often a creative and artistic reason to want to bring more music into a city.
For a non-maximal profit driven business like a music venue, they need a powerful non-business actor to protect them. In most cases, that would be the government. However, the connection point between that fact and the fact that they are perceived as neighborhood nuisances creates a powerful disincentive for city governments to protect music venues. It’s that a perceived neighborhood nuisance can hold down property values. This particular disincentive can be traced back to 1913.
The 16th Amendment to the United States Constitution was ratified in 1913 and empowered the federal government to collect taxes on income. Previously the federal government derived most of its revenue from customs and excises. This meant that the more powerful tax collecting body were typically cities and states. Subsequently, once income taxes became part of the federal government, it drastically reduced cities’ ability to tax income themselves and forced them to seek alternative revenue sources.
As you probably know, today, cities derive a large part of their revenue from collecting property taxes. The thing to know about how property taxes work is that for cities to expand their revenue base from property taxes they either can get more property area, which is an option for cities like Houston, but not others like New York, or they can (or have to) raise property values.
That’s what really fuels rising rents and unchecked gentrification, the drive by cities to raise property values. Music venues, as businesses who don’t necessarily make a lot of money, often struggle to contend with rising real estate values and rising rents in their neighborhoods. Upscale new neighbors moving in often don’t love the fact that the venue is next door and making noise and selling liquor.
Cities do have the power to protect venues, through strategies like rent-control and bestowing landmark statuses. However, the opposing pull of luxury redevelopment and the corresponding growth in their tax base is incredibly strong and cities often give in. That’s why we see venues close for “financial reasons” and even if they do reopen, it’s further and further from city centers.
There aren’t too many solutions to this that anyone can undertake. While cities undertake numerous public relations campaigns to try and show they’re supporting the arts and their cities’ cultural heritages, the cynical reality behind these is that they’re covering up the fact that most of the cities’ incentives are in the other direction and they follow them.
Cities could try and derive more of their revenue from the federal government, but this kind of revenue sharing is more of a pipe dream than anything else, especially considering the current political realities.
There is a solution, but it’s also not an easy one: have cities collect more of their revenue from income. Cities can and many still do collect a small amount of revenue from income taxes. The problem has always been that the federal government already collects so much, it’s tough for cities to collect more on top. Or is it?
As much as some like to criticize cities for being bastions of liberal progressivism, our cities are also home to some of the widest gulfs of income inequality in our nation. Cities could create a structure of income taxes that is deeply progressive (in the tax sense) to more cleanly layer over the existing federal and state tax structure. While the wealthy would be paying into this disproportionately, the marginal utility of each dollar is lower than in a more regressive tax structure (like property taxes). It’s a one-two punch of reducing income inequality and saving music venues.
One might recognize that the above plan is one that’s been, in various forms, touted by liberal economists for quite some time. Tax the rich. But in this particular form, raising municipal income tax rates, it’s actually a plan that Ronald Reagan himself once advocated. In that particular context, Reagan was proposing as part of a wider slashing of federal spending and encouraging states and cities to make it up at their level, but the idea can be less cynical when applied to cities taking control of city-specific issues, for example cultural institutions like music venues.
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