Broke California Considers Taxing Golf

The Governator in California plans to help resolve the state’s $11 billion deficit by imposing a broad spectrum of new taxes, including an increase in the sales tax, a tax on oil production (a particularly dumb idea given the need to increase domestic sources), and new taxes on appliance, furniture and vehicle repair, veterinary services and golf. This plan apparently would raise $4 billion.

It sounds like a good way to damage an industry that’s worth an estimated $6.9 billion to the state’s economy. Even someone with a basic understanding of economics can predict what will happen. Since golf is played with discretionary income, an increase in price will necessarily result in fewer rounds played. That will impact course revenues, and in turn will reduce business taxes collected from the courses. Thus, it’s entirely possible that increasing taxes will result in fewer net taxes collected from golf. Further, if people are playing fewer rounds, course construction will slow, eliminating construction jobs and the subsequent revenues collected from those.

It’s the same with any industry. As John Marshall once wrote: “The power to tax is the power to destroy.” Even in 1819 they knew that taxes discouraged activity.

If anyone in California wants to see the end result of a tax and spend policy, they should take a look at the mess Michigan is in.

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7 thoughts on “Broke California Considers Taxing Golf”

  1. Considering that the Palm Springs/Coachella Valley area is a golf mecca, it would do some serious damage to tourism and the snowbirds.

    Given the number of environmental and water-rights whackos out here, don’t think that killing off the golf course industry isn’t part of the equation.

    Reply
  2. Amen to that. Let’s hit the celebutards where they live. In addition, they should tax botox treatments, any haircut over $50, and the rental value of those designer clothes and jewelry they “borrow” for gala events.

    Maybe they also should legalize drugs so they can tax those.

    Reply
  3. I’m not going to call for higher taxes on anyone, but doesn’t it depend on the price elasticity of demand for golf? It’s a discretionary activity, which suggests that golfers are sensitive to price. (I am, certainly.) I asked a casual friend of mine, a market-loving academic economist, about this question.

    Here’s what he said:

    I found an executive summary of a study in which an elasticity for golf is reported.

    http://64.233.183.104/search?q=cache:U_tHDojwc-kJ:www.sportometrics.com/toc.pdf+elasticity+of+demand+golf&hl=en&ct=clnk&cd=21&gl=us&client=firefox-a

    They find golf is price-sensitive as we thought.

    The tax revenue doesn’t depend so much on the price sensitivity as it does on the tax rate (as shown in the Laffer curve). If golf isn’t taxed and if taxing it doesn’t drive rounds golfed to zero,then taxing it will cause tax revenues to go up. Of course if taxes are raised high enough, no-one may golf.

    The price-sensitivity of golf course owners is a factor too. Even if golfers are price-sensitive, if golf course owners are completely price insensitive, then increasing taxes wouldn’t affect rounds golfed at all as long as the tax isn’t too high. This would just shift income away from golf courses to the government with no impact on golfers (in the short run, of course. No-one is completely price-insensitive in the long run).

    But if both owners and golfers are very price sensitive, even a small tax increase would cause rounds to fall to zero.

    Reply
  4. Amen to that. Let’s hit the celebutards where they live. In addition, they should tax botox treatments, any haircut over $50, and the rental value of those designer clothes and jewelry they “borrow” for gala events.

    Maybe they also should legalize drugs so they can tax those.

    Reply

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