While Rhode Island may be the smallest state in the country, Little Rhody has become a powerhouse when it comes to attracting artists and art lovers to its shores. And the method by which state leaders have leveraged Rhode Island's tax code to benefit the creative community could serve as a model for other states looking to cultivate a stronger arts economy.
"When artists populate an area, it tends to get energized," says Randall Rosenbaum, executive director of the Rhode Island State Council of the Arts.
Targeting specific neighborhoods in need of revitalization, Rhode Island's General Assembly realized that an excellent way to breathe life into these areas was to foster the growth of arts in these communities. Establishing designated arts districts throughout the state in 1996 with the goal of attracting and keeping talented artists, state leaders offered two tax incentives for artists who were willing to live and work in these districts, according to Rosenbaum.
First, all works of art created in these districts could be purchased exempt from state sales tax. This tax break extended to dealers, galleries, and shops within each district.
That, of course, is a great way to attract arts patrons looking for a deal, but the second benefit proved to be a major boon for artists in the state. Under the new district rules, income received by artists from work produced and sold in a designated arts district was exempt from personal state income tax. By this point, you can probably understand why creative types in the rest of the state were looking to expand the idea.
Finally, in 2013, the Rhode Island General Assembly extended the sales tax incentive throughout the entire state. This decision came after a meeting between artists, politicians, and businesspeople who saw the plan as a way to turn the state's creative community into an economic driver, taking advantage of the generous spending habits of what they referred to as "cultural and heritage tourists."
So how has this plan worked out for the state? Well, let's take a look at the numbers from the program's first year.
Beginning in December 2013, the state saw 639 artists and arts-related businesses join the exemptions program by March 2015. This includes painters, writers, sculptors, photographers, and other assorted crafters. In the program's first year, artists unloaded more than 126,000 separate works.
In total, participating artists and dealers reported almost $17 million in art sales in 2014, almost all of this coming from direct sales. In addition to the $16.9 million in sales-tax exempt art sales, participants also reported $8 million in additional sales, which were subject to taxation.
In a 2015 report to the Rhode Island General Assembly prepared by the Rhode Island State Council of the Arts, participating artists were surveyed to find out how they felt about the first year of business under the state's new guidelines. Not surprisingly, the general consensus among the artistic community was positive.
Almost 58 percent of artists surveyed reported that their sales increased from the previous year before the sales-tax exemption was instituted. Almost 33 percent said that sales remained the same in 2014, and just over 9 percent reported a decline in sales.
One issue that was discovered in the Council of the Arts report is that a large number of arts patrons were unaware of the sales tax exemption. When asked about their customers, artists and dealers said that only 27 percent even knew about the exemption. Luckily, more than half of participating artists reported that news of the newly instated tax exemption on works of art contributed to their making a sale.
While Rhode Island hopes to spread the news about the state's arts incentives, it wouldn't be a bad idea for more states to start taking better care of their artists — before all the local creatives start heading up to Providence.