Thursday, November 14, 2013

James Packer pays $60 million in voluntary taxes

So two things happened.  First, Crown Resorts Limited — whose Executive Chairman is James Packer — was awarded an exclusive license by NSW State Premier Barry O'Farrell to operate the A$1.5 billion Barangaroo Point Casino complex in Sydney.  That's a clear win for Crown, and probably for Sydney too.  Second, a few days later, James Packer — the billionaire private citizen, not the Crown Resorts company in which he is a shareholder and Chair of the Board — made a A$30 million donation to the Western Sydney Arts Fund.  Crown Resorts kicked in another A$30 million through its corporate social responsibility fund.

Mr Packer is reported as saying that the Western Sydney contribution was motivated by a campaign by the Telegraph that found that only 1% of NSW's art budget found its way to Western Sydney, which has almost a quarter of the state's population.  He also suggested that his sister Gretel Packer — "a long time supporter of the arts" — put him up to it.  Nice one, Gretel.

Now dark rumblings have erupted through the social media-verse, hinting at the grubbiness of it all.  Many concerned citizens, it would seem, see these two events as obviously related, with a strong whiff of shadiness.  There are circulating calls for Sydney arts organisations to reject the tainted "blood money".

These reactions are naïve.  First, Mr Packer's donation is to independent organisations — such as the Art Gallery of NSW — that can then spend the money in the way they choose.  Second, direct funding from the government is no less troubling, in that this funding is normally paid for through taxes.  Taxes are coerced extractions of wealth from citizens.  Unlike Mr Packer's contribution, the taxes that fund the arts organisations are not voluntary.  If you don't like them, or what they're spent on, you still have to pay them, and if you don't you go to jail.

Consider how different it would be if we instead passed a new law called the "James Packer has to pay A$30 million in extra taxes law".  And let's make this a hypothecated tax, directing the revenue to Sydney arts.  The outcome would have been the same, once it had been washed through the tax system and cleaned as government funding.  Ignore the economic distortions this would create, and the dissipation to overhead costs, or even the inequity.  The only difference is that we would now have an entirely coercive system.  From an ethical standpoint, that is a worse outcome.

Voluntary funding of public goods — whether arts institutions, hospitals or schools — is something we should aspire to, not cringe from.  It is a noble form of citizenship, and if it helps, just think of it as voluntary taxes.

This is of particular value in the field of arts and culture.  Indeed, it can be a much-preferred form of funding for an organisation, which can then choose whether to direct this revenue to line operations, or use the support to take greater risks, or engage in more visionary projects that might otherwise run into the kind of conservatism that the economics of median voter theory predicts.

The A$30 million donation by Crown Resorts is another matter, but that is something between Crown's shareholders and the Board that authorised the payment.  Maybe that was part of the license negotiation, or maybe not.  That's a matter between Premier O'Farrell and his voters.

But it should be perfectly clear that Mr Packer — private citizen — has done a good and generous thing for Sydney arts.  If we will recognise that, we further encourage other good citizens also to consider what voluntary taxes they might also pay.

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