Can Tax Breaks for Top Performers Pump Economic Life Into Atlantic City?

Bill would give ‘A-list’ entertainers who do four shows in the resort’s tourism district a 100 percent income-tax break; they’d keep everything they make

A-lister Bruce Springsteen (center) flanked by the Mighty Max Weinberg on drums and Miami Steve Van Zandt on guitar.
Pop quiz: What do Maroon 5, Britney Spears, Paul McCartney, The Rolling Stones, and New Jersey-bred superstar Bruce Springsteen have in common?

Time’s up.

All were mentioned as the type of A-list entertainer who might be lured to perform in cash-strapped Atlantic City by a huge income-tax break called for in legislation being billed as an economic-stimulus measure that was approved by a state Senate committee yesterday.

But to qualify for the proposed A-list income-tax credit — a 100 percent break according to the bill — there’s a catch. The Boss or another top entertainer will have to hold at least four live performances in the city’s tourism district in the same year.

The tax-break legislation came up for review in the State House yesterday. Atlantic City has been in the midst of a deep struggle this year to recover from a series of casino closures that have taken a chunk out of tax revenues and left many area residents out of work and facing mortgage foreclosures.

The state has tried to help by offering lucrative tax incentives to developers seeking to build in the seaside resort. And Gov. Chris Christie’s administration also appointed a pair of high-profile emergency financial consultants to help city officials navigate municipal budget problems.

Part of the long-term recovery plan for Atlantic City also includes an effort to diversify the city’s revenue stream to ease its reliance on gambling, since neighboring states like Pennsylvania and New York are opening casinos that have eaten into the resort’s customer base.

Luring big-name performers to set up shop in Atlantic City fits in perfectly with that effort, said the bill’s sponsors, Sens. Jim Whelan (D-Atlantic) and Tom Kean Jr. (R-Union).

“I don’t know if this going to work,” said Whelan, a former mayor of Atlantic City, during yesterday’s Senate State Government, Wagering, Tourism and Historic Preservation Committee meeting in Trenton. “But we know Atlantic City is bleeding.”

While some states have no income tax, under New Jersey’s aggressive income-tax policy top entertainers and athletes who perform here pay state income taxes on their earnings, even if they live or are based in another state.

The bill up for consideration yesterday seeks to entice entertainers to perform in Atlantic City by offering a 100 percent break on income they earn for performances held in the city’s tourism district.

As an added sweetener, the measure also extends the tax break to other performances held at other venues in New Jersey during a calendar year.

“I think it would be transformative,” said Kean Jr., citing as an example the type of “residency” that Spears, the Grammy-winning singer, is doing right now in Las Vegas. And she’s able to collect her income there tax-free since Nevada is one of nine states that do not levy an income tax.

[related]This past summer, Atlantic City — for the second straight year — hosted major concerts on the beach in August, with Maroon 5 drawing an estimated 50,000 spectators and country act Rascal Flatts pulled in 30,000.

Those events bode well for an expansion of the city’s entertainment base that could get a boost from the tax credit, Kean Jr. said.

“You will always have the gaming base, but you also need an entertainment base,” he said. “This would be, in the end, transformative.”

But the bill also has its critics, including New Jersey Policy Perspective, a liberal Trenton-based think tank. The success of the summer concerts proves that Atlantic City is a draw, the organization argued in a memo prepared on the tax credit. And too much revenue from already wealthy entertainers would be sacrificed to make the break worthwhile to taxpayers, the NJPP said.

“All the facts confirm that the only folks gaining income since the Great Recession are those in the top tax brackets, particularly the very top. They’re the least in need of tax breaks,” said New Jersey Policy Perspective President Gordon MacInnes. “New Jersey needs funds to invest in the proven assets that bring better times to all New Jerseyans. This bill just shrinks the dwindling pot.”

When asked by Sen. Peter Barnes (D-Middlesex) how he would respond to such criticism, Kean Jr. and Whelan pointed to the other tax income that the state would generate from the performances, even after giving top entertainers the 100 percent tax break.

“You would have a compounding effect,” Kean Jr. “This is about the hotel rooms that get filled up, the restaurants that get filled up.”

Another issue that came up during the committee hearing was the question of who will define “A-list” performers, the ones who would ultimately qualify for the huge tax break.

The bill says identifying A-list entertainers would be up to the New Jersey secretary of state. The designation could also apply to comedians, dancers, and athletes such as professional boxers, among others. The stakes would be high because entertainers not deemed “A-list” would still have to pay a share of the income they earn here, assuming they would still play the four live events in Atlantic City.

Right now, the secretary of state role is being filled by Lt. Gov. Kim Guadagno.

In a moment of humor during the hearing, Sen. Shirley Turner (D-Mercer) stressed that who makes the A-list is an important issue given the diverse tastes and preferences of New Jersey residents. She said, for example, that she wasn’t familiar with Maroon 5 or its star lead singer Adam Levine.

“I’m not so sure I would (leave) it up to the secretary of state,” Turner said. “My A-list may be somebody else’s B-list.”

But Kean Jr. tried to assure Turner that the bill’s language would ensure that A-list performers who are no longer topping the charts would qualify for the tax break. And he stressed Levine is well-known, citing his work on NBC’s television show “The Voice” and this summer’s sold-out beach concert.