New Senate Bill to End Federal Stadium Subsidies Won’t End Stadium Welfare

U.S. Senators Corey Booker and James Lankford want to close a federal tax loophole for the bonds used to finance stadium construction.

by Patrick Hruby
Jun 13 2017, 9:24pm

Kirby Lee-USA TODAY Sports

Finally, Congress is doing something useful. Well, sort of. On Tuesday, U.S. Senators Corey Booker (D-NJ) and James Lankford (R-OK) introduced a bill that would eliminate the federal tax exemption for municipal bonds used to finance sports stadium construction—closing a tax loophole that already has cost American taxpayers billions of dollars.

Currently, when state and local governments use your money to help billionaire team owners construct shiny new stadiums and arenas they could otherwise totally afford to pay for themselves, they do so via municipal bonds. Because the federal government wants to encourage the construction of things like schools, hospitals, and libraries—in other words, actual public goods—the IRS leaves the interest on those bonds alone.

Problem is, the same policy also serves as a generous subsidy for stadium construction that's shared by taxpayers across the country. According to the Brookings Institution, the loophole that Booker and Lankford are looking to close has cost the federal treasury $3.7 billion since 2000, with new Yankee Stadium in New York accounting for a whopping $431 million.

In a press release announcing the new bill—a companion measure was introduced in the House in March by Representative Steve Russell (R-OK)—Booker and Lankford note that sports stadium welfare is a waste of taxpayer money and delivers little or no economic stimulus to local economies. They aren't wrong. Basically every economist who has studied the issue (and not been paid by a team) says the same thing. Moreover, there's something particularly odious about running up the national credit card to stuff the pockets of already rich guys like Roger Goodell, Mark Davis, and the recently deceased Mike Ilitch.

So, yes: this proposed law is a very good thing. However, it's hardly a silver bullet. A few things to keep in mind:

* American taxpayers are still on the hook for billions: That $3.7 billion in lost revenue since 2000? Uncle Sam isn't getting a refund, and neither are the rest of us.

* Congress has tried (and failed) to do stuff like this before: As I've written elsewhere, sports welfare dies hard. In 1999, former Vice President Joe Biden, then a Delaware Senator, co-sponsored a bill that would have required MLB and the NFL to pay up to 50 percent of construction costs for new stadiums. Just half! It went nowhere. Nine years later, former Rep. Dennis Kucinich (D-OH) held a series of hearings about public stadium financing. He claimed his probe into the construction of new Yankee Stadium uncovered "substantial evidence of improprieties and possible fraud." Nothing happened.

Instituting public policy that adversely impacts the wealthy and powerful—and that doesn't produce an immediate tangible gain for everyone else—isn't exactly a strength of the American political system. Case in point? The very subsidy Booker and Lankford are trying to end. In the 1980s, former Senator Pat Moynihan (D-NY) closed a previous loophole for federal tax-exempt private revenue bonds being used for stadium construction, prompting local governments to use tax-exempt general-purpose bonds instead.

A decade later, Moynihan tried to rectify his oversight with a bill. It flopped. There's no guarantee Booker and Lankford's proposed law won't meet the same fate. In fact, that's pretty likely. Monied and influential sports owners with billions to lose figure to fight like hell against it. Will American taxpayers who are each losing an estimated average of $27 a year on the current subsidy do the same?

* This won't kill Sports Stadium Welfare: Booker and Lankford acknowledge that their bill won't prevent localities and states from smashing the public piggy bank to pay for sports stadiums; in fact, they all but brag that local governments will be allowed to finance future stadium subsidies with ticket and in-stadium purchase taxes. Thing is, that's still a giant fucking waste of public money—every ticket tax dollar spent on giving the Cincinnati Bengals a future holographic scoreboard is a dollar not spent on a textbook, patched pothole, or preventing the Washington, D.C. subway system from randomly catching on fire.

That said, there's one thing Congress could do to kill sports stadium welfare once and for all: impose a 100 percent federal tax, paid for by sports teams, on all state and local spending designed to benefit them. In fact, I wrote about this idea last week, and you can read all the details here. The only issue with this proposal? In the late 1990s, former Representative David Minge (D-MN) introduced a bill in the House that essentially would have made it law for all corporate welfare. It died in committee, and no one in the Senate even bothered to propose a concurrent measure.

Anyway, kudos to Booker and Lankford. Ending stadium subsidies has to start somewhere. Just don't expect a quick finish.