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Obama takes on Sports Owners

2015 February 3
by Victor Matheson

President Obama’s proposed budget to Congress presents a fairly strong challenge to Republicans. It redistributes income from the rich to the middle class often by eliminating loopholes that benefits the wealthy. Spectator sports will take two big hits if this budget gets passed.

First, college sports teams will no longer be able to package sports tickets with a deductible charitable donation to the college or university. Currently many teams require season ticket holders to make a donation to the college in order to purchase season tickets. Why charge, say, a $1000 donation plus $500 for season tickets instead of just charging $1500 for the tickets in the first place? Because the $1000 is tax deductible for the purchaser allowing the season ticket holder to get back $200 or $300 dollars on their tax returns. Basically, this works like a mail-in rebate for season ticket holders paid for by the federal government allowing colleges to charge more for tickets.

Second, municipalities will no longer be able to issue tax exempt bonds for stadium construction if private teams are the primary recipients of the revenues of the stadium. One might call this the “Levi Stadium Tax Avoidance Repeal Act”. While the new 49ers stadium was almost entirely privately financed and is operated by the 49ers, the stadium is still technically owned by the municipality. An examination of the financing of this stadium by Robert Baumann, Debra O’Connor, and myself found that this financing arrangement works out to a roughly $200 million tax subsidy for the stadium despite almost no direct taxpayer subsidies.

Overall, sports economists have long been critical of both of these hidden subsidies for sports and are just happy that we are so influential with the President.

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