(Photo credit: Karen Politano)
This past Wednesday (02/12/2020), the Arizona House Ways and Means Committee convened to hear HB2385 (TPT; reimbursement; motion picture production), which is a proposed bill to reimburse sales tax on movie productions as an incentive to attract more production work into Arizona. As a member of the AZ Film & Media Coalition, I — along with a dozen or more others — crowded into Hearing Room 1 of the Arizona House of Representatives to show my support for the bill.
At this hearing, after several speakers spoke in favor of the bill, a person with an opposing viewpoint posed a question to the members of the Ways and Means Committee. She said (and I paraphrase only slightly): “If I go into a restaurant and order a sandwich, I am expected to pay sales tax on that sandwich. But if Brad Pitt goes into that restaurant and orders a sandwich, and he’s here working on a movie, he doesn’t have to pay sales tax. Why should Brad Pitt not pay Arizona Sales Tax that I would have to pay?”
It was a question that went unanswered, as this was not the venue for an extended discussion of the subject. As she was the last speaker, it became a lingering thought in my head; and I wondered “what justification do I have for allowing Brad Pitt to buy a sandwich and not have to pay sales tax?” Eventually, the answer dawned on me. And I wrote it down here.
The speaker was speaking in a vacuum. No disrespect toward her, but this is a common occurrence. We draw analogies between two things that appear to be the same but are not — as if no other factors need be considered, i.e. in a vacuum. If I walk into a restaurant and order a sandwich, it would likely be a cheeseburger and I would likely also order a short beer. Not including the tip, I might shell out about $20. The Arizona State sales tax would be 5.6% or $1.12. In contrast, there’s every likelihood that Brad Pitt, walking into that same restaurant, would order appetizers, an entree something more interesting than a cheeseburger, one or more drinks, either beer, wine, or mixed, and dessert. Moreover, he would likely arrive with six of his closest friends, most of whom are either in his regular entourage or who work on the movie with Mr. Pitt.
I can’t tell you what kind of meal bill these folks would rack up, but it would probably be substantial. Maybe $350? Let’s say $350. Seven times fifty. Okay? Total State sales tax lost is $19.60. But the total revenue generated by an in-state restaurant is $350 versus my $20. (Oh, and by the way, the total tip earned by the server could easily be $80 or $100 dollars, versus $4 from cheapskate Joe.)
Quite a difference, right? But I know what you’re saying: “But Joe, you just compared one person to seven people. Isn’t that an equally unfair analogy?” It’s a valid question. Here’s where we speak to the vacuum. We aren’t really comparing the value of my meal versus an identical meal ordered by a movie star. What we’re actually comparing is the opportunity cost of not having access to Brad Pitt’s business versus the value of having it. You see, it’s a much bigger picture than the difference between his hamburger and mine. In fact, you’ll still get my $1.12, because I’ll still get that burger and beer. And so will a whole lot of other people once they’ve found out that Brad Pitt ate there!