Disneyland Tax Time for Anaheim ?

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Disneyland Tax Time for Anaheim ?

Postby whiteshadow » Wed Jul 08, 2015 9:39 am

Is Anaheim a frightened little "Mickey Mouse" or will it finally stand up to Disney?

Walt Disney once said, "I hope we never lose sight of one thing: it was all started by a mouse."

Imagine doing a kitchen reno and asking your town or city for a thirty-five-year property tax exemption because you've given local artisans work and some sales tax to Home Depot. Today the city of Anaheim California will consider whether to give Disney a thirty-year entertainment tax exemption in exchange for a billion-dollar multi-year reno of Disneyland.

Disney will surely invest a billion dollars anyway. It must compete against a revamped Universal Studios that is Fast and Furious-ly closing the competitive gap and will soon launch the Wizarding World of Harry Potter. Harry Potter is far scarier than a few million dollars in entertainment taxes.

In many ways Disney is Anaheim and Anaheim is Disney. The company employs over 25,000 people--the next closest Anaheim employer, 5,000. Read the summary report on the entertainment tax reimbursement plan and you'll wonder if Disney or Anaheim wrote it. On second thought don't read it. Walt wouldn't want you to. He'd have Pinocchio read the report aloud so that everyone on Anaheim's city council could watch his nose.

Anaheim Mayor Tom Tait was in favour of the Disney tax exemption that is currently in effect--a twenty-year ban put in place back in 1996 to entice Disney to build California Adventureland--but he is "wiser" now. He is wiser because Anaheim faces a $500 million unfunded pension obligation.

Chaining the hands of future residents on their ability to impose taxes will jeopardize the city's financial health. (Mayor Tom Tait)
A simple back-of-the-envelope calculation performed by an English major using readily available information reveals that Anaheim should just say no to Disney. The entertainment tax does not exist. It's a hypothetical tax from which Disney is receiving real protection. If a tax were to exist, it would probably look something like Las Vegas' two-tiered entertainment tax--10% on venues that host less than 7,500 people and 5% for venues the size of Disney. (5% is also the tax rate Anaheim suggested way back in 1975).

So a 5% tax on a ticket that now costs $99 for anyone over age 10 with (conservatively) 16 million visitors per year to Disneyland and 8 million to California Adventureland would yield...

Back-of-the-envelope calculations indicate that by signing the agreement with Disney, Anaheim would be forgoing $119 million of potential tax revenue per year. In the city's assessment, the incremental tax derived from Disney's capital investments (one billion plus an additional $500 million to get fifteen more years of tax exception to 2061) would be a measly $27 million.

The case for giving Disney a pass on taxes is as flimsy as a boat from It's a Small World and its arrogance as annoying as the song that goes with the ride. However, it is that song that will likely make Anaheim fold and makes every town, city and even country bow to the demands of megacorporations. It's a small world when it comes to investment and if you don't like the arrangement, we can move our billion dollars elsewhere. Or so the empty threat goes...

Disney is a global company and can choose any of their other five locations to make this type of capital enhancement, so we're feeling lucky. (Anaheim's Assistant City Manager, Kristine Ridge)
Lucky? Anaheim is lucky to be on the receiving end of veiled threats? Anaheim may be Mickey Mouse in its approach to Disney, but the corporate script is, like, totally Californication. But Anaheim is a small story, a minor episode in a much larger saga of corporate tax avoidance. According to CBS News, Disney transferred international profits to Luxembourg, enabling the company to pay an effective tax rate of 0.3% on more than a billion euro in profit.

And according to Bloomberg, almost fifty companies have changed addresses to tax havens such as Bermuda, an inversion strategy that a Congressional panel projects will cost the federal treasury $19.5 billion in future revenues over the next decade. A Cayman Islands company owns at least sixteen Disney subsidiaries.

While corporations perfect their Pirates of the Caribbean routine and governments do nothing, Anaheim is in an ideal position to send a strong message, to say no to Disney and vote down the entertainment tax reimbursement scheme. But if council is foolish enough to acquiesce, then it should consider an It's a Small World tax--a $8,000 flat tax every time the song is played.

$8,000 is not a random number--it's based on the settlement awarded to a disabled man who was stranded on the ride while the song played continuously. Around the Disney world in its five theme parks, It's a Small World is played 1,200 times per day--roughly 1/5 of which would be played in Anaheim. Hold on...

When Walt Disney's "It's a Small World" debuted at the 1964 World's Fair, ten million ride tickets were sold at 95 cents for adults and 60 cents for children with all proceeds going to UNICEF. Walt would surely approve of the It's a Small World tax. It would make him chuckle. Walt loved a good laugh. And Walt would know what decision Anaheim city council should make later today.

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