Bills Currently Winding Their Way Through Congress On Eliminating Sports Federal Tax Subsidies
Senate Bill 1342 submitted June 12, 2017 and House Bill 811 submitted February 1, 2017 are tax subsidy reform measures that amends the Internal Revenue Code, with respect to the tax exemption requirements for state and local bonds, to specify that bonds issued to finance professional sports stadiums meet the private security or payment test. (A state or local bond that satisfies both the private business use test and the private security or payment test is considered a private activity bond that is taxable unless it is used for certain qualified private activities.)
According to Senator Cory Booker’s website:
The bill would close a loophole in the tax code that allows professional sports teams to finance new stadiums with municipal bonds that are exempt from federal taxes.
Municipal bonds are intended to give communities a way to finance projects, such as hospitals, schools, and roads, without needing to pay federal taxes on the debt’s interest. Using municipal bonds to finance sports stadiums diverts money away from these critical local infrastructure projects.
“Professional sports teams generate billions of dollars in revenue. There’s no reason why we should give these multi-million-dollar businesses a federal tax break to build new stadiums,” Senator Booker said. “It’s not fair to finance these expensive projects on the backs of taxpayers, especially when wealthy teams end up reaping most of the benefits.”
“The federal government is responsible for a lot of important functions, but financing sports stadiums for multi-million – sometimes billion – dollar franchises is definitely not one of them,” Senator Lankford said. “Using billions of federal taxpayer dollars for the subsidization of private stadiums when we have real infrastructure needs in our country is not a good way to prioritize a limited amount of funds. I’m pleased to work with Senator Cory Booker to introduce this bill to eliminate the use of federal tax-exempt bonds for sports stadiums. Everyone likes free federal money to build their expensive stadiums, but with $20 trillion in federal debt, this is waste that needs to be eliminated.”
The bill would end federal subsidies for stadium financing, but would not prevent localities and states from bidding and offering economic incentives to teams. In eliminating this wasteful expenditure, the bill also unties the hands of local governments to finance their stadium subsidies with taxes on tickets and in-stadium purchases—in other words, allowing states to target taxes on the people who actually use and benefit from the subsidy. Current tax law does not allow local governments to finance federal stadium subsidies by levying taxes on stadium purchases.
Since 2000, 36 professional sports stadiums have been constructed or revamped under financing provided by federal tax-exempt municipal bonds, costing taxpayers over $3.2 billion dollars. Despite billions of dollars of federal funding flowing toward these projects, stadiums have proven to have limited to no impact on local economic development. In fact, twenty years of research finds that “there is no statistically significant positive correlation between sports facility construction and economic development,” particularly across income growth or job creation.
Brookings Institute article in 2016 titled “Why the federal government should stop spending billions on private sports stadiums:”
In “Tax-exempt municipal bonds and the financing of professional sports stadiums,” Brookings Senior Fellow Ted Gayer, Austin J. Drukker, and Alexander K. Gold quantify the federal subsidies given to finance professional sports stadiums built or majorly renovated since 2000, and the total loss in federal tax revenue.
All together, the federal government has subsidized newly constructed or majorly renovated professional sports stadiums to the tune of $3.2 billion federal taxpayer dollars since 2000. But because high-income bond holders receive a windfall gain for holding municipal bonds, the resulting loss in total revenue to the federal government is even larger at $3.7 billion.
With so much money at stake, it’s worth asking: Should the federal government be spending money on these stadiums? Federal subsidies are justified for infrastructure projects that provide a public good across states, but local sports stadiums clearly do not meet this criterion.
Indeed, there is little evidence that stadiums provide even local economic benefits. Decades of academic studies consistently find no discernible positive relationship between sports facilities and local economic development, income growth, or job creation. And local benefits aside, there is clearly no economic justification for federal subsidies for sports stadiums. Residents of, say, Wyoming, Maine, or Alaska have nothing to gain from the Washington-area football team’s decision to locate in Virginia, Maryland, or the District of Columbia.
Does the NFL and its advertisers really want to challenge this politicization of the National Anthem and the US Flag at a time when bills are already being placed on congressional calendars that would financially strap their operations?
Neither of these bills (nor the ones introduced in 2016) were in response to some remark by President Trump but were in response to the loss of taxpayer revenue and possible uses that those funds could have been applied to in social assistance programs.
I hope both of these bills are addressed quickly and that the NFL and others realize just what a serious spot they are in financially both from the disapproving patriot fan base and now from loss of “free money” from their tax exemptions.
Time and past time for a tax code revision and removal of tax exemption on corporate and 501(c) dodgers who have found ways to eliminate their responsibilities while they stuff their bank accounts and pay exorbitant salaries.