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Do Cultural Tax Districts Buttress Revenue Growth for Budding Arts Organizations?

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Abstract

What role should the government play in financing the arts in America? A wealth of research has been dedicated to whether lump sum government transfers to nonprofit organizations “crowd-out” private giving. However, little attention has been paid to the incidence of voter-approved cultural sales tax districts in the US and the effect they have on the future success and sustainability of participating organizations. This study uses a natural experiment approach to evaluate the effect that the Scientific and Cultural Facilities District (SCFD)—the largest cultural tax district in the US—has on private and program-related revenues for the over 300 organizations that receive annual support from its proceeds. Results show that after controlling for other countervailing factors, being a small arts organization in the district increases total revenue by $3.66 million compared to other regional organizations inside and outside of the district. Most importantly, these same organizations also crowd in $2.17 million in earned revenue and $1.6 million in private giving. This suggests that SCFD funding may have a positive influence on the future growth and sustainability of nascent cultural institutions.

Suggested Citation

  • Lauren Schmitz, 2012. "Do Cultural Tax Districts Buttress Revenue Growth for Budding Arts Organizations?," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2012-1, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
  • Handle: RePEc:epa:cepawp:2012-1
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    Keywords

    Taxation; Subsidies; Revenue;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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