Subsidies and Sports
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Rescooped by Christopher Whitehead from Sports Facility Management.4387777!

IL: Hidden deals, hefty subsidies keep sports teams in your city

IL: Hidden deals, hefty subsidies keep sports teams in your city | Subsidies and Sports |
By Scott Reeder | SPRINGFIELD, Ill. — The most miraculous baseball play of 1988 didn’t happen in a...

Jason Cain's curator insight, March 22, 2014 10:23 PM

Here again we see the benefits of having a major team in the area along with politicians that do not want to lose a team while they are in office. 

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Sports subsidies in Texas: lotsa bucks, little bang

Sports subsidies in Texas: lotsa bucks, little bang | Subsidies and Sports |
Promoters routinely hype the economic impact of sports events to get public subsidies. But in Texas, no one follows up to see if the promised revenues materialize.

Via Brad Schlather
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Taxpayer-backed sports stadiums are a $31 billion rip-off - Mike Kroll

Taxpayer-backed sports stadiums are a $31 billion rip-off - Mike Kroll | Subsidies and Sports |
Presented by Citizens for Tax Justice. Citizens for Tax Justice. We've known for a while that government subsidies and tax breaks for sports stadiums are a raw deal for taxpayers. But a new book by Harvard University urban ...

Via Sanchez Brown
Erika Scott's comment, March 22, 2013 1:05 AM
I wish I had found this article earlier. It touches on some key points on why public subsidies are not beneficial to the community. Also, it mentions how some companies do not take all factors into consideration when they assess subsidy effects on a community.
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Should Sports Teams Receive Tax Breaks?

Should Sports Teams Receive Tax Breaks? | Subsidies and Sports |
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."

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.