How your taxes subsidize the Super Bowl — and how that might change

Sports fans eagerly await Super Bowl LV between the Kansas City Chiefs and Tampa Bay Buccaneers. The NFL deserves kudos for calling an audible, strengthening pandemic protocols following early outbreaks, and enabling teams to complete the season. As usual, the league gave fans plenty of what they wanted — and as usual, it came partly at taxpayers’ expense.

Take the Buccaneers – the first team to host their own Super Bowl appearance – who treated federal coronavirus funding as a new form of stadium subsidy, reminding us that billionaire team owners will find any excuse to use public money for private profit. 

The team used over $10 million in federal funds, granted by Hillsborough County’s board of commissioners, for stadium upgrades that tangentially addressed coronavirus concerns. The improvements are the sorts of things you’d expect in any modern stadium: Touchless toilets, sinks and soap dispensers; automatic ticket scanners and credit card readers; a new parking lot PA system; queueing stanchions; and 6,600 traffic cones. Because the upgrades weren’t completed until most of the season was over, it’s fair to question whether protecting fans was the only priority.

That’s also typical of stadium subsidies. How many loyal fans and suspicious voters have seen frightening PR campaigns arguing that without government support, their beloved teams will skip town? In some cases, the threat is real. It’s also how the Buccaneers convinced Tampa to bear the entire cost of building Raymond James Stadium in the 1990s. Florida taxpayers weren’t the only ones on the hook, either: If you’re a U.S. resident, you’re paying, too.

That’s because the payments from bonds that municipalities sell to pay for stadium construction aren’t subject to federal income taxes. The rationale – that the federal government shouldn’t (indirectly) tax local governments – makes sense when funding necessary infrastructure that’s widely used by the public. But it’s hard to justify the same tax privilege for private enterprise.

That’s why the loophole has been on the chopping block for 35 years. The bipartisan 1986 tax reform tried to end it, but accidentally made it worse. A decade later, Sen. Daniel Patrick Moynihan (D-N.Y.) tried to fix the problem he helped create but succumbed to “a hail of lobbying fire.” President Obama made it part of his 2015 budget, President Trump tweeted about it, Sens. Cory Booker (D-N.J.) and James Lankford (R-Okla.) introduced legislation to end it, and cutting it was even initially part of the 2017 Republican tax reform. 

Why does it matter so much? Brookings Institution research found that from 2000-2016, the four major sports leagues were subsidized with $14.2 billion in municipal bonds, which reduced federal tax revenue by an inflation-adjusted $4 billion. Taxes collected from everyone else have to be higher to make up the difference. The federal subsidy alone (not counting the much-larger local stadium subsidies) is equivalent to an extra $31 in taxes paid by every household in America. It just doesn’t seem fair for Idaho families to be funding Florida billionaires’ profits.

Even worse, the stadium-driven revenues that cities and states rely on to pay back their stadium debt have dried up during the pandemic, just as their governments face a combined $500 billion budget deficit due to the coronavirus.

It doesn’t have to be this way. Taxpayers can’t renege on the contracts that politicians have already signed, but they can make sure that good money isn’t thrown after bad.

First, most states already have constitutional restrictions on using public money to benefit businesses. But over time, the legal definition of “public interest” has become so watered down that there’s virtually no limit on what a state legislature or city council can subsidize. Taxpayers could demand a restoration of the proper legal definition, but it will be an uphill battle.

Second, Congress could step in and prohibit state and local subsidies, since they interfere with interstate commerce. My recent research with John Mozena of the Center for Economic Accountability makes this argument, since it would reduce the amount of aid that state and local governments might need from the federal government to restore their financial stability. 

Third, and perhaps most optimistically, there’s growing momentum at the state level to create an interstate compact to end economic development subsidies, of which stadium subsides are only a part. State and local governments waste around $95 billion every year trying to stimulate their economies, for little to no gain. Most policymakers I’ve spoken with want to find a way out of this race to the bottom. An interstate compact offers a way for them to credibly commit to working together. 

So, whether you’re frustrated by stadium subsidies, or just sick of seeing Tom Brady in the Super Bowl, there’s hope. Sometimes, things actually change. Maybe taxpayers will finally have their day. Even the G.O.A.T. has to retire eventually, right? 

Michael Farren is a research fellow with the Mercatus Center at George Mason University.