Bear Creek Fails to Pay Amusement Tax

photo credit: Bear Creek

According to a report published in the Reading Eagle, Pennsylavania's Bear Creek ski resort has failed to pay a municipal amusement tax and Longswamp Township is preparing legal action to collect back taxes.

Earlier this year the township tax levied a tax of 10% on revenue derived from amusements generally. However, given that there are very few other major amusements in the township, the tax was almost certainly intended as a direct tax on the ski resort. Of course, this does not excuse the resort's failure to pay the tax. But as municipalities across the country deal with a decline in tax receipts due to the recession, many will look for creative ways to raise revenues.

To close a budget deficit, a municipality must choose between cutting the size of local government (or level of municipal services) or increasing taxes. Often towns employ a combination of both. But raising taxes on residents directly is unpopular and Berks County (PA) already has high property taxes. Taxes on specific local industries is a way to raise revenue without directly taxing voters, but is short-sighted.

Other businesses are free to pick a tax and regulatory environment that suits their needs. Unfortunately, ski resorts cannot relocate. Mountains are where there are. Remember, resorts already pays thousands of dollars in property taxes to local municipalities.

Resorts are forced to deal with whatever taxes local governments choose to levy. But taking 10% more from any business' bottom line is a quick fix that will either: (1) cause the resort to pass the cost of the tax along to consumers, raising  ticket prices; or (2) force the resort to eat the tax increase if it cannot raise prices.  Either way the resort's competitiveness takes a big hit.

Local governments have only themselves to blame when local ski hills close after those governments add a crushing tax burden onto small ski areas. No one would mistake Bear Creek with Vail. Local ski hills are at best only marginally profitable. At worst they struggle to make ends meet. Longswamp Township's amusement tax is poor policy.

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