Museums as Economic Engines, Part 3: Museums Generate More than $12 Billion a Year in Tax Revenue

A Mellon Foundation-supported study by the American Alliance of Museums and Oxford Economics highlights the need for a greater understanding of how museums contribute to US tax revenue.

Economic Engines Blog 3.JPGThis graph shows the tax contribution of museums on both the state, local, and federal levels.

Museums are essential institutions in American life and culture. They help shape our individual and collective understanding of our past, present, and future. Museums also serve as economic engines, providing hundreds of thousands of jobs and generating billions in tax revenues across the country, contributing approximately $50 billion to the US economy each year. 

To understand the role museums play in our economy, the Mellon Foundation funded a study by the American Alliance of Museums and Oxford Economics titled Museums as Economic Engines: A National Report. In previous posts in this blog series we have discussed the impact museums have on the GDP and on job creation; now let’s look at their impact on taxes.

The economic activity generated by the museum sector was worth over $12.0 billion in tax revenue in 2016. This figure includes $8 billion in federal revenue and $4 billion in state and local revenue.

A portion of these taxes comes directly from museum operations, but most come from what economists call indirect or induced impacts, which measure how much activity museums create in other areas of the economy. Indirect impact reflects the economic activity generated by museum supply chains, calculating what museums spend on things like real estate, IT, or catering. Induced impact calculates the amount spent by employees of a museum. For example, rents paid from employee wages are considered induced impact. All factored in, each job created by the museum sector results in $16,495 in additional tax revenue.

While museums are strong contributors to the tax base, they are most valuable for the role they play across the nation as community anchors and imaginative spaces that encourage public engagement, exploration and discourse. Museums help transform our understanding of who we are.