"Wouldn't you love to see one of these NFL owners, when somebody disrespects our flag, to say 'get that son of a bitch off the field right now, out, he's fired.'"
That set the NFL world afire. NFL players and NFL owners who support them began ranting against the President. The President shot back by taking to Twitter to call out these protesting players for their lack of Americanism and decorum.
President Trump has now called into question why tax laws exist, which benefits billionaire NFL owners at the expense of all Americans. The president tweeted this today, Tuesday, October 10th:
"Why is the NFL getting massive tax breaks while at the same time disrespecting our Anthem, Flag and Country? Change tax law!"Congress allows state and local governments to issue tax-exempt bonds to help finance sports stadiums and arenas. Tax exemption lowers the interest rate on debt taken on to pay for stadiums. Since Congress does not levy capital gains taxes on those tax-free bonds, Congress loses many millions over time compared to taxes collected on private-sector corporate bonds.
Forcing citizens to pay taxes to build stadiums is one of the biggest rip-offs, all-time. If there were profits to be had building and operating stadiums, publicly-traded corporations would have been in that business long ago. All stadiums would be owned by two or three firms. No firm would seek subsidies.
The typically trotted out argument in favor of politician-floated bonds to pay for half, most or all of sports stadiums and sports arenas is the claim of economic benefits. The biggest claims are these:
- building stadiums creates construction jobs
- customers who attend games spend into the economy
- workers for the franchises spend into the economy
- games attracts tourists who spend into the economy
All of this spending into the economy is supposed to have knock-on effects, which enrich locals and grow the economy. Supposedly, these knock-on effects make publicly-funded stadiums to be self-financing: subsidies are offset by revenues from ticket taxes, sales taxes on concessions and other spending outside the stadium, and property tax increases on nearby structures that have higher potential re-sales.
Here is reality. Unless those stadiums are filled every day or night with out-of-towners, i.e., unless locals are exporting an entertainment product, on enough nights to at least break even, such an argument easily gets exposed as being bogus.
If locals fill those stadiums and arenas, locals merely switch their business from movie theater operators, restaurateurs and the like to those who have the right to sell tickets, concessions and parking.
By far, major-scale bondholders earn far more than any athlete, franchise worker or stadium worker. It is all too likely that most bondholders do not live locally and thus do not spend their coupons locally. As well, it is all too likely that most athletes live elsewhere in the off-season.
Those who champion stadium deals financed by the public literally are saying these:
Socialist-style command economies work better since people are too stupid to figure out an economy on their own. The invisible hand does not work.
Politicians are picking winners and losers. Every dollar taxed to pay for bonds is a dollar swiped away that reduces investment elsewhere, investment that reflects preferences of locals.
Those landlords who own structures and business owners who own businesses (restaurants and hotels) near stadiums luck out with extra local spending, but others become losers.
If short-run demand increases to locate businesses near stadiums, short-run demand will fall to locate businesses further away from stadiums. So "property values" will rise near stadiums but fall away from stadiums.
Why should anyone be forced to pay taxes so that only some win?
Rather than politicians levying taxes on locals to pay for bonds, what would be the effects of locals having more of their income to spend on their preferences? How much of that would circulate in the local economy, differentiating that economy to reflect those preferences?
How much does the subsidies cause consumers to spend on the subsidized sport rather than spent elsewhere (movies, amusement parks, museums)? Why should politicians steer spending toward sports team owners and away from owners of other products on offer?
Every event causes increased expenses for cities not covered by the taxes collected to pay bonds. Every event requires extra police, traffic control, more public transit, more road wear and tear. Taxes levied for the bonds do not pay for these outlays. Yet, these outlays must be paid. So, local taxes either remain higher than need be or new taxes get levied to pay for such expenses.
Every dollar swiped in taxes is one less dollar that can be put to use in investing for productive gains.
Building Stadiums is Like the Broken Window Fallacy
Typically, the broken-window fallacy gets trotted out as refutation over those who claim destructive acts, whether a natural disaster or man-made, is good for the economy because people will spend to rebuild what has been destroyed.
Yet, one can think of the lack of a stadium as a broken window. Building one "fixes it."
In 1850, economist Frédéric Bastiat Bastiat told the parable of a broken window to point out why destruction doesn't benefit the economy.
In Bastiat's tale, a man's son breaks a pane of glass. Onlookers claim the boy has done all a service because his father will have to pay the glazier to replace the broken pane. In short, onlookers claim that breaking windows stimulates the economy.
Bastiat refutes their claims and exposes their fallacy by showing how the father's disposable income has fallen. Since the father must pay for the window, the father can not buy new shoes or some other luxury good.
Though the broken window enriches the glazier, the broken window impoverishes others of other industries. The net effect is that overall spending for all goods falls.
The same happens with stadium and arena building. Relatively few construction workers get richer but many more workers in other industries get poorer since dollars that would have been spent elsewhere have been taken away in taxes. The same can be said for sports franchise owners and their employees. They are get richer at the expense of workers and owners of other firms within the municipality where stadiums get sited.
Why Subsidize Anyone's Capital?
Americans do not subsidize the building of McDonalds everywhere, i.e., the capital of McDonalds franchisees, so why should Americans subsidize the capital (stadiums) of billionaires?
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