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Should Sports Teams Receive Tax Breaks?

Should Sports Teams Receive Tax Breaks? | Sports Facility Management 4232425 | Scoop.it
Here are some of the costs, pros and cons of sports teams receiving tax breaks. 

 

In a very general sense, the question of tax breaks for sports teams falls under the category of whether or not subsidies are desirable. From an economic perspective on subsidies, some could say that almost all of them create suboptimal outcomes. This is because under normal market conditions market forces move automatically towards allocative efficiency. Subsidies distort the ability of markets to correctly allocate resources because they provide an incentive to continue the subsidized behavior, even when it is not profitable or productive to do so.

 

Why Subsidies Are Useful
The counterargument is that subsidies are useful for this very reason. They allow government to shape economic outcomes toward desired policy objectives. For example, the money used to fund alternative energy sources. So although the subsidy is creating a less than optimal use of resources, people believe that is balanced by the development of technology that might not have otherwise been built until much later, if at all. Another reason people champion subsidies is to protect jobs or create growth. However, the job market is subject to the same economic forces as any other. By creating subsidies in unproductive industries people remain in jobs that are also unproductive; this makes society worse off. In the case of sports teams, the most commonly cited reason for subsidies is that it creates jobs and improves revenues. Yet there have been studies that conclude that this is not always the case.

 

Not All Need Tax Breaks
Most sports teams are actually quite profitable and do not actually require tax breaks to remain competitive. Examples of the types of subsidies sports teams regularly enjoy include: tax-deductible ticket sales (including on luxury suites), reduction of taxes on revenue via direct tax credits and sweet-heart deals on new facilities. What this means is that corporations, and even individuals, can deduct a portion of what they spend on tickets in a similar manner as donating to a charity. In the case of new stadiums, the burden of building and operating arenas gets pushed onto the taxpayer while owners reap the related revenues. Unfortunately, due to the secretive nature of professional teams, most financial information is inaccessible thus preventing the public from accurately gauging the level of financial support these franchises receive.

 

However, let us be fair and consider the case where sports teams are legitimately struggling and only government aid can keep them afloat. This hearkens back to the beginning of this piece and the discussion on whether or not it is believed that subsidies are useful. Insofar as civic pride is concerned, maybe it is considered appropriate to prop up a flailing team. People have an emotional connection to their sports teams. They buy tickets to games, purchase merchandise and follow every story about their chosen champions. Despite this, only a very small portion of the population (20%) thinks that tax breaks for sports teams is good policy.

 

The intuition for this is that if a sports team is failing it is because it is poorly run and is spending itself into a hole, or the fans do not support it with enough revenue to continue. Either way, this is not an enterprise that should be having public money thrown at it. Perhaps the largest segment of government support goes toward the construction of stadiums. Fancy new stadiums attract fans and sports teams alike.

 

Cities often will use the promise of a new stadium to entice teams to relocate. Is this a good investment on behalf of the public? Almost all economists and independent development specialists conclude that the rate of return on these projects is less than what could be had on alternative projects, with some sports contracts failing significantly. Further, those cities that invested heavily in sports stadiums have experienced, on average, slower income growth compared to their peers who chose otherwise.

 

The Bottom Line
There is no silver lining. The public does not support deluxe treatments for sports teams in the form of tax breaks, the data does not support tax breaks for sports teams and commonly accepted economic theory does not support tax breaks for sports teams either. This leaves fans and citizens paying double as both their taxes and discretionary income go towards profitable franchises instead of schools and roads. The only people who benefit from such activity are those who own, operate and work for sports franchises. As Norman Braman, former owner of the NFL's Philadelphia Eagles, put it: "the taxpayers are a bunch of suckers."


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Vinnie's curator insight, February 17, 2015 9:08 PM

Basic breakdown of public subsidy benefits for sports teams.

Bryant Tucker's curator insight, July 24, 2016 6:10 PM
This is a great article that gives an understanding of both the good and bad of the tax breaks, as well as the notion that some teams are very profitable and could afford their own building efforts.
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Sports Risk Management

Sports Risk Management | Sports Facility Management 4232425 | Scoop.it

Here you will find a few articles and case studies on topics related to risk management in sport settings.

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5 Great Stadiums That Use Sustainable Energy

Although replacing referees is never alright, replacing energy sources with more eco friendly solutions is. Going green is never a bad call. Let’s put some stadiums that have replaced their energy needs with more sustainable options under review.


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Dorothy Hale's curator insight, April 15, 2013 11:47 AM

Stadiums get green and join the tree huggin' party!

Calvin Adams's curator insight, June 15, 2013 1:44 PM

Eco friendly stadiums will help our overall progression to a new and greener lifestyle.

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A Big Green Stadium (Renovation) For The 2014 World Cup | Sustainable Cities Collective

A Big Green Stadium (Renovation) For The 2014 World Cup | Sustainable Cities Collective | Sports Facility Management 4232425 | Scoop.it
We’ve brought you a few big green stadiums in connection with the London Olympics, and a few from the NFL as well. The World Cup however, happens every four years — and as far as the world at large, football is soccer.

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Sports Facility Team Management Tip: Perks for Players

Sports Facility Team Management Tip: Perks for Players | Sports Facility Management 4232425 | Scoop.it
This entry was posted in Sports Facility Management and tagged Team Management. Bookmark the permalink. Follow any comments here with the RSS feed for this post. Comments are closed, but you can leave a trackback: ...

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Jon Brewer's curator insight, August 21, 2013 6:37 PM

Good article about a facility that decided to offer membership to local team.  The membership allowed the players to use the facilities amenities as well as bring in revenue for the facility.  Good idea for facilities that do not have steady teams.

Colby Morris's curator insight, September 9, 2013 3:53 PM

I learned from this site that the key to running a sports facility is to create relationships with local sports teams.  Depending on the sport that accommodates the facility, a facility manager should create benefits for local sports teams with their facility.  This site talks about how enabling perks to the local athletes will generate business and also keep the athletes coming back. Giving team member’s special benefits can motivate players to return and also can provide a revenue boost for the facility.  The benefits should last all year round, even during the slower seasons so players can get their off-season work in.  Another idea that is useful is to sponsor a sports team so other teams can see your facility and business.  Also, making a membership available online is a good marketing tool; it advertises the facilities relationship with that team and encourages other teams to develop a similar relationship with your business.I found it interesting that a facility could sponsor a team.  I wasn’t aware of this information but now that I know it, it will certainly help me with my future goals if I ever end up purchasing my own facility.  I found it educational to give teams perks because it’s an inside tip I feel since not all sports facilities I know of have this option.  Giving the teams special perks will keep the team coming back to your facility and could also help more teams practice and use your facility. I selected this article because I always thought it would be cool to run my own indoor baseball facility for players to use in season and during the off-season.  Then, with my facility, I would create my own AAU (Amateur Athletic Union) team and allow my team to practice in my facility.  I always dreamed of becoming a baseball coach and having a facility could bring two of my dreams to life.  My facility would have cages for players to pitch and hit in, and also a designated turf area for kids to play catch on or field grounders.  With the future approaching, it could maybe even be possible to raise the ceiling enough to hit pop ups to the outfielders.  This article really gave me a good insight on how a facility should be run.This information will help me in the sports management industry by having a sports facility for athletes to use to get better at baseball.  Not only to get better at baseball, but also a weight room could be installed so the players could become stronger as well.  There are many opportunities that are presented with owning a sports facility and all opportunities really interest me.      

Thomas Gerdes's curator insight, February 19, 2015 10:51 AM

This article talks about how you can create a better atmosphere around your team if you include teams from surrounding communities

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Risk Management Steps for Weathering Tornadoes and Other ...

Nohr Sports Risk Management, LLC. Recently, Hawaii was hit by unexpected tornadoes, hail and thunder and lightning—weather events that are rare for the islands. Tornadoes are more common on the continental United ...

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GREEN STADIUMS, Sustainability reaches sports facilities ...

GREEN STADIUMS, Sustainability reaches sports facilities ... | Sports Facility Management 4232425 | Scoop.it
GREEN STADIUMS, Sustainability reaches sports facilities. Awareness about environmental conservation has increased to all areas of real estate development, and the stadiums are taking actions to reduce the high impact of ...

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Go Green! Sports stadiums save energy

Go Green! Sports stadiums save energy | Sports Facility Management 4232425 | Scoop.it
The green movement identifies sports and its venues as role models.

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Calvin Adams's curator insight, June 15, 2013 1:43 PM

Green is the way to the future. I dont think people like to touch the flushing handles at sporting events anyway. :)

Joshua yarger's curator insight, August 19, 2016 8:04 PM

Saving money and making the world a better place, should go hand in hand.

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Rogel Noll - "The Economics and Politics of Stadium Subsidies in Pro Sports"

Stanford economics professor emeritus Roger Noll gave the 2010 Kim Thomas Interdisciplinary Lecture on Thursday, October 21 in A.J. Villalobos Hall. Noll's r...

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Green Goals Set for Brazil's World Cup Stadiums - Environment News Service

Green Goals Set for Brazil's World Cup Stadiums - Environment News Service | Sports Facility Management 4232425 | Scoop.it
Environment News Service Green Goals Set for Brazil's World Cup Stadiums Environment News Service But many of the stadium operators are not experts in sustainability and need to expand their knowledge on the subject, in order to manage their...

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Kelli Pennington's curator insight, August 25, 2013 5:20 PM

Green is becoming the hip and cool in the same way it is saving the environment!

Jonathan Griffith's comment, September 22, 2013 6:31 PM
Hopefully other stadiums will catch on to these practices. Although initially more expensive, it will save money in the long run as well was preserve the environment.