Public subsidies for major-league sports teams and their wealthy owners are hard enough to swallow when local taxpayers are asked to foot the bill.
But the idea that residents of Sacramento should have to pay to help build a new basketball arena in, say, Seattle, boggles the mind.
Under the current federal tax code, however, that’s the way it works. President Barack Obama is trying to end this bit of corporate welfare. His effort deserves support from both sides of the aisle. Unfortunately, he will probably face nearly universal opposition instead.
This big-league subsidy comes in the form of tax-exempt municipal bonds. The bonds, which were originally designed to help finance public infrastructure projects like roads and sewer systems, are commonly used by state and local governments to help front the cost of new arenas and stadiums, even when those buildings are going to be owned or controlled by private interests.
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The effect is to reduce the borrowing costs for the team owners. The bonds carry a lower interest rate because investors are willing to accept a lower rate of return, since they don’t have to pay tax on their interest income.
The stadium tax break will cost the treasury an estimated $542 million during the next 10 years. That’s chump change in a multitrillion-dollar annual budget. But it’s still real money. And it is, in effect, a transfer from the nation’s poorest citizens to some of the wealthiest.
If local taxpayers use their own money to cajole team owners to come to their town or stay, that’s their prerogative. But they shouldn’t be able to use federal tax law to force residents of other cities and towns – perhaps even those cities that are losing a team – to pay part of the cost for a team’s new digs.
Sacramento’s deal for the new downtown arena, while controversial in many respects, does not employ tax-exempt bonds.
The president’s proposal will face an uphill battle in Congress. Already, members from both parties in New York have come out against it because, you guessed it, they favor a publicly financed stadium for the Buffalo Bills’ NFL team. Others in Congress will no doubt pile on.
But that’s always the problem with corporate welfare. The benefits go to a few well-organized and well-funded interests who wield outsized influence with the decision-makers, while the rest of us get scalped for a dollar or two.
The pain, spread around in such a way, does not hurt enough to justify anyone’s time in fighting against the giveaway.
Politicians often talk about creating a “level playing field.” In this case, Obama is trying to do exactly that for taxpayers. In Washington, D.C., that qualifies as a Hail Mary pass, one that needs a little prayer to have a chance to succeed. But even a desperation play is worth trying if the cause is just. This one is.