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Taxpayers Lose When NFL Owners Get Subsidies

March 5, 2018

Time for lawmakers to sack sports subsidies.

As people gathered in their homes and in bars to watch the Philadelphia Eagles defeat the New England Patriots, thoughts of football glory and Super Bowl rings danced in fans’ heads.

Now, after the game is over, everyone should continue to think about a different side of sports: politicians’ use of taxpayer money to pay for stadiums.

For example, the stadium in which quarterback Nick Foles led the Eagles to victory, U.S. Bank Stadium, which serves as the home field for the Minnesota Vikings during the regular season, will cost taxpayers more than $1.1 billion over the next 28 years. And millions more in tax revenue goes toward the stadium’s upkeep every year. The money is collected from the city’s sales tax, restaurant and liquor taxes levied on consumers visiting downtown, and hotel taxes that target out-of-town visitors.

Elected officials have traditionally justified using taxpayer money to pay for the construction or renovation of sports stadiums by incorrectly arguing that doing so is a surefire way to create economic growth. However, a wealth of evidence suggests that claim is not true.

In 2008, University of Maryland at Baltimore County economics professor Dennis Coates and University of Alberta economics professor Brad Humphreys reviewed decades’ worth of studies on stadium subsidies. Their conclusion may not be surprising, but it bears saying out loud: Sports subsidies don’t work as advertised.

“There now exists almost 20 years of research on the economic impact of professional sports franchises and facilities on the local economy,” Coates and Humphreys wrote. “The results in this literature are strikingly consistent. No matter what cities or geographical areas are examined, no matter what estimators are used, no matter what model specifications are used, and no matter what variables are used, articles published in peer-reviewed economics journals contain almost no evidence that professional sports franchises and facilities have a measurable economic impact on the economy.”

Interestingly, if sports-stadium welfare does have an economic impact, evidence shows it might be a negative one for many workers. Instead of creating new economic activity, adding more entertainment to a metropolitan area’s menu of entertainment option simply redistributes existing consumer spending; it typically does not create more new spending.

Individuals who may have otherwise spent fun money on bars or restaurants instead decide to attend sporting events. This, according to Coates and Humphreys’ 2003 study relying on U.S. Census Bureau data, causes per-capita declines in local workers’ incomes.

“Our results suggest that professional sports has a small positive effect on earnings per employee in the amusements and recreation sector, but that this positive effect is offset by a decrease in both earnings and employment in other sectors of the economy,” Coates and Humphreys wrote.

Going to the ball game and rooting for the home team surely delivers many intangible benefits to people, including local camaraderie and a day of fun with family and friends. But helping billionaire sports team owners finance their sports stadium construction projects doesn’t guarantee economic growth or improve life for most people, which means governments should avoid these actions at every opportunity.

A growing number of legislators are doing just that. Lawmakers in several states are considering bills prohibiting sports stadium subsidies — including in Arizona, Florida and Virginia — suggesting that elected officials are waking up to what economists have known for a long time: Sports stadiums may be family fun, but they’re no good for families’ funds.

It’s time for lawmakers to sack sports subsidies and stop socializing the risk of investing in sports teams to help politically connected team owners spend other people’s money. Taxpayers deserve much better.

[Originally Published at the Virginian Pilot]

Author
Jesse Hathaway is a policy advisor for budget and tax issues at The Heartland Institute.
media@heartland.org @JesseinOH

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