Athletes tax four times larger than was previously reported
Friday, January 18, 2002
A special state tax that is supposed to benefit arts and humanities programs has generated far more money than previously reported, but the excess is not being used as intended.
Instead, the extra revenue from the special income tax on non-resident athletes' and entertainers' Missouri earnings is plugging holes in the state's tight budget.
State law directs the revenue to the arts, humanities, libraries, public broadcasting and historic preservation.
Two percent of the artists' and athletes' compensation is collected by venues as tax and remitted to the Department of Revenue quarterly, said Greg Talbut, assistant director of the Show Me Center. Talbut said the Show Me Center collected $6,962 for the special tax in fiscal 2001.
Some weren't taxed
Until recently, the Department of Revenue had been calculating only the taxes paid on behalf of athletes on visiting teams -- not the payments for athletes who are members of Missouri teams but live in other states. That meant the taxes withheld by teams such as the Kansas City Royals or St. Louis Rams were excluded from the formula that distributes cash to the arts and other groups.
After lawmakers raised questions last year, the Revenue Department re-evaluated its interpretation of the tax.
"We did a very extensive review. We determined that what the law required is that those non-resident athletes who are members of Missouri teams should be included in that estimate," Stan Farmer, director of the Taxation Division in Jefferson City, Mo., said Thursday.
The result was significant.
Under the old interpretation, the tax would have been calculated at $4.7 million in fiscal year 2001, Farmer said. Under the new accounting method, the tax revenues totaled $19.1 million last year.
The tax revenues are on track for similar or even higher amounts during the 2002 fiscal year that ends June 30. Yet, because the budget includes just $4.3 million, that is the maximum that can go to the arts and other groups.
Used for shortfalls
The rest of the money is being used to cover shortfalls in other parts of the state budget.
Farmer and other state officials appeared Wednesday before a House appropriations committee in Jefferson City, which had been beset with complaints from the potential beneficiaries of the tax.
Their explanation helped to a limited extent.
"At least now, everyone knows what it should be, and before we didn't know that," said Rep. Bill Ransdall, D-Waynesville, chairman of the House Appropriations-Natural and Economic Resources Committee.
But the knowledge comes a little too late, he said. Had the Revenue Department used the correct interpretation when the state was flush with money a few years ago, more dollars could have been appropriated to the arts, humanities and such.
"The sad thing is we don't find the money until we are in this bad financial situation," Ransdall said.
Full amount unlikely
Now, because other parts of state government have come to rely on the athletes and entertainers tax, it appears unlikely that the full amount available will be appropriated for the legally prescribed uses in the fiscal 2003 budget that Gov. Bob Holden and lawmakers are developing.
Although state law describes a formula for distributing the money to certain groups, it does not require the Legislature to follow that in its appropriations.
This year's appropriation of $4.3 million, for example, was about half of the previous year's, and Holden originally had recommended that no money go to the humanities, libraries, public broadcasting or historic preservation.
Holden's budget office declined Thursday to reveal its recommended uses for the athletes and entertainers tax in fiscal 2003 before Holden delivers his annual budget address next Wednesday.
Norree Boyd, director of the Missouri Arts Council, said she understands that the tight budget may prevent her group from receiving its deserved windfall in revenues under the new interpretation of the tax law.
Yet she said the Missouri Arts Council trust fund needs more money than it received this year.
"We could not approve any new projects this year" because of the low state payment, "so there's no new private money coming in either," Boyd said.