NBA tax subsidy: Fans vs. public policy

Some Arizona lawmakers want to waive the state’s sales tax in order to get the 2009 NBA All-Star Game in Phoenix.

According to the Sports Law Blog, the plan would exempt the state’s 5.6 percent sales tax on tickets to pro basketball’s annual showcase game, as well as to associated attractions. The blog cites an article in the Arizona Republic which reports the tax loss could be as much as $400,000, but that some believe the NBA won’t select
Phoenix without it since the city just held the
game in 1995.

While this is a one-off tax deal, the philosophy of providing tax benefits for sports teams is perpetually debated across the country.

Economically, it’s not a good idea. Studies repeatedly show that tax breaks and other government-provided inducements to land a sports team don’t pay off, or at least not for a long time.

And yes, as TaxProf, on whose site I saw mention of the Arizona NBA tax proposal (thanks!) and Roth & Company note, such largesse primarily benefits wealthy team owners and players.

But let me play devil’s advocate, an apropos term for the sports topic at hand since the New Jersey Devils originated as the Kansas City Scouts, spent a few years as the Colorado Rockies, and then headed to the Meadowlands and the subsidized Brendan Byrne (now Continental) Arena. Thanks to additional tax breaks from the Garden State, the team will be playing in Newark next season.

As the Devils’ moves show, despite the facts and figures, governments still pay for sports teams. And there is some cash to be gained. States and other jurisdictions now regularly collect income tax on players’ income, both home team and visiting personnel, via the so-called jock tax.

There’s also a fractional bit of revenue gain from taxes on fan purchases of tickets (except in the proposed Arizona case), concessions and merchandise, along with the always outrageously priced parking fees.

And entrepreneurs who come up with team-related products and services will earn some income and pay employees, all of which will go in part to their local and state treasuries.

We’re Number 1! Realistically, though, the main advantage of having a major league team is psychological. Residents get that major league feeling and, if they’re lucky, boasting rights.

Another valuable intangible is the publicity the team can garner for a locale. Of course, you want to make sure it’s the right kind of publicity, not athletes committing criminal acts.

And the overall appeal, and any precise revenue equation, depend on the sport and the cities coveting franchises.

I still remember how horrible almost every Marylander felt when the [Old Line State football fans, insert your preferred epithet here; mine’s not printable] Irsay family stole the Colts from Baltimore in late March 1984, spiriting them out of town in the middle of the night.

Even worse, they took the team name.

To this day, every time I hear Indianapolis folk and the NFL suits refer to Johnny U and Colts’ records in the same breath as Indiana, I want to scream. Those stats and memories will always belong to Charm City.

OK, dear hubby, you’re right. I do actually scream at the TV in those situations.

And before you come back at me with "What about Cleveland?" at least Art Modell was upfront about his plans to move the team and he left the city the Browns’ name.

The point is, now that I’ve come back to it after my ranting anti-Irsay digression, is that Maryland was devastated when the Colts were taken away.

Even the hubby and I, Maryland transplants who, as Cowboys’ fans, had witnessed the bitter defeat of our team by the Colts in Super Bowl V, were angry. So we joined a majority of our then-neighbors and voted for the tax breaks to build the stadium that is now the Ravens’ home.

And I’d do it again.

Maybe I just let my sports fanaticism cloud my better tax judgment, but hey, sometimes you just gotta support your teams any way you can!