Who Pays the Ticket Tax?

Abstract

Since 1971, the City of Boulder, Colorado, has imposed a tax of 5% on the price of admission to all public events, including movies, concerts, and theatrical performances. However, the city has recently been sued by theater owners on the grounds that the theater owners bear the burden of the tax and that this burden represents an unconstitutional infringement on the theater owners’ freedom of speech. The claim by owners that they bear the burden of the tax goes directly to the issue of the incidence of the tax; that is, who bears the burden of the ticket tax? In this article, the incidence of the ticket tax under various scenarios is examined. The authors conclude that it is extremely unlikely that the true burden of the ticket tax falls on theater owners. Instead, it is found that consumers are almost certain to bear the burden of the tax. More generally, the authors conclude that most excise taxes should be viewed as falling on consumers despite claims by interested or disinterested parties to the contrary.