While politicians and special interests grapple over the details of tax reform, one proposed provision deserves support.
The House bill would do away with the tax exemption for municipal bonds commonly used to build sports stadiums. This tool has been used often to finance stadiums on the backs of taxpayers largely without them noticing it. It’s bad government, diverting public money to wealthy team owners who leverage even larger profits. Such bonds were intended to be used to construct schools, roads or sewer systems.
It should be noted that both the Vivint Smart Home Arena and Rio Tinto Stadium, the homes of Utah’s two major league franchises, were built, and in the case of the Vivint arena recently renovated, using partial public funding. But in neither case were tax-exempt municipal bonds used.
Rio Tinto Stadium, home of Real Salt Lake, was funded in part by transient room taxes, which are levied as charges added to hotel room fees. About 18 percent of the recent renovation of the Vivint arena, home to the Utah Jazz, was provided through Salt Lake City’s redevelopment agency. The $22.7 million appropriation is in the form of tax increment financing, meaning it will be repaid over time by the incremental increase in taxes generated by the project.
Both of these examples were highly publicized public decisions. Voters had the opportunity to express opinions about such funding mechanisms and may hold politicians accountable, if they so desire.
Tax exemptions on municipal bonds, however, are more hidden. They simply mean taxes that otherwise would be paid are not, which costs governments potential revenue.
Not surprisingly, NFL owners have vowed to lobby against this change, which may jeopardize the funding scheme of a new stadium in Las Vegas that was used to lure the Raiders.
Naturally, the removal of this exemption would be seen as retribution by Republicans, and especially President Donald Trump, against NFL players who have refused to stand for the national anthem as a protest against racial inequality.
Regardless, the exemption still deserves to die on its own lack of merit. Even President Barack Obama proposed to end it in his 2015 budget proposal. Numerous independent academic studies have shown that stadium subsidies siphon money from the public and do not lead to promised economic growth.
It’s difficult to justify the exemption on any basis other than an emotional exuberance for the game — a feeling that does no harm until it forces everyone in a community to subsidize it.
The Brookings Institution published a study last year showing how this exemption was used to provide $3.2 billion in construction subsidies since 2000, helping build or renovate 36 stadiums. The Las Vegas deal would provide an estimated $120 million benefit.
A 2015 study by Stanford economist Roger Noll noted that NFL stadiums are used infrequently — usually for a total of 10 games a year, including preseason games and not including potential playoff games for the better teams. Most stadium employees are seasonal, even if facilities are used for concerts and other events during warm-weather months.
By contrast, a large shopping center or manufacturing plant would employ many more people permanently, adding a more sustainable economic benefit to a community. Noll said even basketball and hockey arenas provide better economic returns than pro football stadiums because their uses are greater.
Mounting credible academic studies won’t dissuade the NFL, which insists its stadiums and teams are a boon for local economies and justify the tax breaks. Those arguments have worked in the past. But given the league’s current problems, the tide may have changed. Even liberals would have difficulty avoiding the evidence that tax subsidies hurt low-income taxpayers who would benefit from other uses of tax money.
Of course, if this passes, pro teams would undoubtedly find other ways to win subsidies from their local governments, but those ways likely would have to be more transparent or would require an affirmative public vote. That sounds a lot more like democracy than the current system.