The big-wigs at the National Football League are upset.
Sure, they might be a bit miffed at former fans balking over the already politicized football pre-game becoming even more politicized by players “taking the knee.” Yeah, the mucky-mucks might be troubled by news of brain injuries for players due to repeated head trauma, and, yes, the corporate heads might be upset by occasional reports of violent criminal behavior among a small minority of players and former players.
But this week, the big issue for the NFL is taxation, and it’s not what one might think.
As Frank Pingue reports for Reuters, on November 7, the NFL hierarchy spoke out against a GOP-led proposal to change the tax law.
Is the U.S. government going to take more of the league’s earned cash? Nope.
Is the U.S. going to give a tax rebate to competitors, say, the National Foosball League, to apologize for previous state-backed theft of earnings? No.
Instead, the GOP-led House is going to vote on a change in tax law that would no longer allow tax exempt status for municipal bonds sold to fund stadiums where giant corporate teams like the ones in the NFL would play.
That’s right. NFL thinkers are upset that the feds might change the tax code in a way that no longer encourages bankrupt cities to float tax-backed bonds to pay for boondoggle arenas – arenas that help the NFL, and a few local merchants, but consistently harm people outside the vicinity of the arena and force taxpayers to pay back much of the cost of the bonds.
This is the National Football League, which had a net worth of over $45 billion dollars in 2014, more than the National Basketball Association and Major League Baseball combined (and the NFL pulled in $13 billion in 2016). This is the NFL, whose commissioner, Roger Goodell, made $34.1 million in 2014.
For some uncanny reason, the folks close to Mr. Goodell think it is a-okay to claim not only poverty when it comes to funding their own team stadiums, but to self-righteously tell taxpayers that they should be forced to subsidize their stadiums.
As Mr. Pingue notes, NFL spokesman Joe Lockhart said in a conference call:
“You can look around the country and see the economic development that’s generated from some of these stadiums… These sorts of infrastructure projects have a long history, and the benefits of them are obvious in many of our communities around the country, so we will continue to make our opposition known on that.”
So, if I can convince local politicians that my diner or movie theater or one-man puppet show will bring business and “benefits” to a few folks near the spot where I run the endeavor, is it ethical to get those politicians to float bonds that let me get below-market rate loans to expand my endeavor, or refurbish my spot? After all, if the taxpayers can be on the hook for paying for a portion of the stadium bonds (which they always are), why can’t other businesses get tax-supported bonds and construction as well?
How is it that the NFL is incapable of supporting itself?
And if the idea is really so good for local businesses, why can’t the NFL float its own bonds and attract enough private investors to support their new building endeavors? If it’s such a good deal to have a stadium in a city, and businesses all over will benefit, wouldn’t they be interested in the double-win of the construction and the payoff of their investment in the bond itself?
The answer is clear. The NFL takes advantage of local politicians who are, in turn, taking advantage of taxpayers even as they make up fantasy stories that the “economy will thrive” once a stadium is built or refurbished in this manner, and the current tax code favors the municipal bonds over private bonds, because the “munis” are promised to be redeemable without tax, while private bonds are taxed upon redemption.
Again, Mr. Pingue does fine work noting in his Reuters piece:
A report last year by the Brookings Institution, the Washington-based social sciences research group, found that of the 45 major-league stadiums built or overhauled since 2000, 36 were at least partly funded by tax-exempt municipal bonds.
Meanwhile, cities are in the red all over the U.S. That includes cities like Detroit, which, as I wrote in June, recently voted to shower $34 million on refurbishment of Little Caesar’s Arena to attract an NBA team.
Taxation is statutory theft. It is unethical, inexcusable, and the less often it happens, the better, but what one sees with the federal tax break for municipal bonds, especially for those focused on sports stadium construction, is the use of the tax code to favor certain businesses or behaviors and to allow local or state governments to come up with excuses for further taxing their citizens.
As Joel Kitkin writes for Reason, publicly subsidized stadiums are bad investments, so why not let freedom reign and allow taxpayers to be left alone -- allow private investors to decide what’s good or bad?
The answer comes in the perverse economic habit of politicians and politically-favored businesses to focus on “that which is seen” and to avoid the much larger picture of what is “unseen”. It’s a lesson French political-economist Frederic Bastiat explained in the 19th Century: When a politician proposes a project, he or she will focus on the benefits he or she wants people to see. So we’ll hear about the “local merchants” benefitting from a stadium. But we won’t hear about the multitudinous taxpayers who have had their choices taken away, their money taken from where they would have spent it based on their own preferences, and we will not see the businesses expanded or started because of this.
Government spending is never better than private spending. It can only take away from individual choice and harm the market process. Ending a perverse tax exemption that favors local or state bonds is one way to return a semblance of market sanity to a local problem that has existed for generations.