What Atlantic City needs: A tax break for "A-list" stars?

Here's a group you wouldn't expect to be getting a tax break. But New Jersey lawmakers are working on granting one to so-called "A-list" entertainers and athletes. That is, to those who perform in Atlantic City, the state's struggling gambling mecca. Under a proposal that's advancing in the New Jersey state legislature, these stars would get a state income tax exemption on any fees they earn for performing in Atlantic City.

Performers would have to apply to New Jersey's Secretary of State to secure the "A-list" designation and perform at least four times in a calendar year in Atlantic City. Once granted the designation, fees earned at other Garden State venues would also be exempt from the state income tax.

"Top bands that can sell out shows and earn tax-free income in Las Vegas or Miami have little incentive to play in Atlantic City or subject themselves to New Jersey's high tax rates," said State Senator Tom Kean Jr., the State Senate Republican leader and co-sponsor of the legislation. "We should not forget that we generate no tax revenue from empty venues when performers skip New Jersey."

According to Citizens for Tax Justice, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming don't have a broad-based income tax, which is why Kean referred to performers working tax-free in Las Vegas and Miami.

Kean's proposal, which has bipartisan support, was approved by the Senate's Wagering, Tourism & Historic Preservation Committee and now advances to the full Senate.

"When popular bands visit Atlantic City, they draw huge crowds that buy concert tickets, eat at city restaurants, stay in local hotels and spend money shopping and gambling at casinos," said Kean in a statement. "That surge of economic activity that accompanies A-List performers is exactly what Atlantic City needs to survive and thrive."

He noted that a Maroon 5 concert on the beach at Atlantic City drew more than 50,000 fans to the destination.

Of course, not everyone is sold on the proposal. "People on the 'A-list' aren't driven to take gigs based on local tax rates," said Gordon MacInnes, a former state senator and president of New Jersey Policy Perspectives, a nonpartisan Trenton-based progressive think tank. "No question, this is a perfect example of misguided trickle-down economics, where, despite decades of proof to the contrary, some people still believe this kind of tax cut works for economic development."

The "A-list entertainer" tax exemption bill advances as the entire State Senate voted this week to authorize a controversial state takeover of Atlantic City's municipal finances. The local government is expected to run out of money to pay its bills as soon as next month.

Earlier this month, rating agency Moody's warned that the city was on the verge of defaulting on its $240 million in existing debt and advocated state intervention to stave off bankruptcy. The Atlantic City region has one of the highest foreclosure rates in the nation, and according to the U.S. Census Bureau, more than a third of Atlantic City's residents live below the poverty line.

Mayor Don Guardian, a Republican, has denounced the possible state takeover as creating "a fascist dictatorship" that violates the civil and constitutional rights of the citizens of Atlantic City.

City Council President Marty Small told CBS MoneyWatch that a proposed takeover was akin to a similar move Michigan Governor Rick Snyder made when Detroit and Flint faced a similar fiscal crisis. "It is an extreme overreach," Small said. "With this takeover bill, they are disenfranchising the voters."

"In just the last two years, we have had a 53 percent property tax hike, and our ratable base has gone from $20.5 billion in 2010 to just $6.6 billion in 2016," Small said. Local officials have vowed to go to court to resist the takeover. Small also said he would oppose any tax exemption for "A list" performers. He said the state's mismanagement of the gambling industry has played a major role in Atlantic City's fiscal woes.

Earlier this year, Governor Chris Christie announced his own proposal for a state takeover of Atlantic City's finances. It was approved by the State Senate, but must still pass the Assembly, where Democratic leadership has expressed concerns about a takeover's impact on existing union contracts.

With bricks-and-mortar casinos proliferating nationwide, as well as online gambling venues, Atlantic City has seen a dramatic decline in business, forcing the recent closure of four casinos. According to the New Jersey Division of Gaming Enforcement, Atlantic City gaming tax revenues have dropped from a high of $413.3 million in fiscal 2006 to $197.1 million in fiscal 2015.