WASHINGTON ― Though Republicans talked a good game about getting rid of it, their new tax law preserves a tax exemption that helps billionaire team owners build sports stadiums at public expense.
Republicans haven’t said much about why they kept this particular tax break, which benefits wealthy sports bigwigs who donate heavily to Republican candidates for office and are friendly with President Donald Trump and gave generously to fund his inauguration.
“This is the classic political economy problem of special interests,” said Victor Matheson, a College of the Holy Cross economist who has studied the economic impact of stadiums.
Under the law as it still stands, cities and states can issue tax-exempt bonds to build stadiums where enormously profitable major league sports teams play. The bonds issued since 2000 alone will ultimately cost the federal government about $3.2 billion over their terms, according to the Brookings Institution, a centrist think tank.
“That is about $10 per person in the U.S., hardly an amount that gets people to rise up in the street,” Matheson said. “But the use of tax-exempt financing can easily save an individual NFL owner $20 million in financing costs for the new stadium for every year of his lease.”
The House version of the tax bill eliminated the stadium subsidy, but the Senate bill didn’t. When the two sides came together to hammer out the differences, the Senate ― and the rich owners of NFL, NBA and MLB teams ― won this round. As a result, every American taxpayer will keep helping to finance increasingly expensive stadiums.
“The point of those bonds is to help communities to build infrastructure and when you have teams that make billions of dollars, that’s probably not the best use of our tax structure,” Rep. Diane Black (R-Tenn.), who was a member of the conference committee that negotiated the final bill, told HuffPost.
Sen. John Thune (R-S.D.), another member of the conference committee, said that even some Senate Republicans didn’t want to preserve the stadium subsidy.
“I think it was probably controversial on our side,” Thune told HuffPost. “The use of private activity bonds and some of the things that the House did away with, there was a lot of support for in the House, but there was also strong support for in the Senate. But I think a lot of those were part of the negotiation, and it was a lot of give-and-take on both sides.”
Sen. Dean Heller (R-Nev.) took credit for killing the House provision in a statement last month. “Heller was able to protect the tax exemption for stadium bonds, which is critical to preserving the influx of business and growth associated with the construction of the Raiders stadium in Las Vegas,” his office said on its website.
Nevada approved a plan last year to put a record $750 million in taxpayer money into a new stadium for the NFL’s Oakland Raiders, who will relocate to Las Vegas as soon as 2020.
The sports tax break was a creation of the 1986 tax overhaul. It provides a federal subsidy to stadium projects through discounted interest rates on the tax-free bonds and was originally written in the hopes of curtailing public spending on stadiums.
Instead, it helped spark a boom in new stadium construction. Cities and states dumped more than $17 billion in public money into stadiums between 1986 and 2012, according to a Bloomberg analysis. The building explosion has only continued since.
Government watchdogs and lawmakers on both sides of the aisle have lamented stadium subsidies for more than a decade, for good reason: while new stadiums have helped double the value of sports franchises, there is near-consensus among economists that the costs of new stadiums for the taxpayers far outweigh the minuscule economic benefits they provide cities and states.
Repealing the tax break for sports facilities would have led to only modest savings over the next decade ― an estimated $200 million, according to the Joint Committee on Taxation ― and it wouldn’t have stopped taxpayer-financed stadium construction. But it would have removed federal taxpayers from the equation ― someone living in St. Louis, for instance, would no longer help pay for a new billion-dollar arena in Las Vegas.
It would have also raised the costs of such projects for both team owners and state and local governments, potentially adding millions of dollars a year in interest payments to stadiums’ already exorbitant price tags. No surprise then that the broad support for repealing the subsidy was countered by vocal and bipartisan opposition, particularly from lawmakers with new or pending stadium projects in their districts.
Rep. Dina Titus (D-Nev.), whose district includes the new Raiders stadium, said the repeal provision of the House bill was “one of the many reasons why the GOP tax bill is bad for Nevada.” Rep. Joe Barton (R-Texas) said he would try to ensure that a new stadium for baseball’s Texas Rangers would still get the tax break even if it were repealed.
Rep. Peter King (R-N.Y.), who opposed the tax bill primarily because it curbed a deduction used by high-income taxpayers to write off what they pay in state and local taxes, said pressure from lawmakers in stadium districts likely killed the subsidy repeal.
“I would assume it’s people from areas where that would benefit,” King said.
MLB and the NFL lobbied Congress on “issues related to tax reform” throughout 2017, according to federal lobbying disclosures. The NFL publicly opposed the effort to eliminate the stadium tax break. Neither the NFL nor MLB immediately responded to a request for comment.
In the final stretch, preserving the tax break became “a priority” for President Trump, a Republican aide told The Wall Street Journal in December.
Though Trump made a show of threatening NFL-related tax breaks in the fall ― a bit of political theater rooted in his opposition to football players protesting police brutality and racial injustice during the national anthem ― he is also friendly with several influential NFL owners, including New England Patriots owner Robert Kraft, who donated $1 million to Trump’s inaugural committee, and New York Jets owner Woody Johnson, who now serves as Trump’s ambassador to the United Kingdom.
NFL owners collectively gave Trump’s inaugural committee more than $7 million. The league itself contributed $100,000. During the 2016 election cycle, NFL owners donated more than $8.5 million to political candidates and causes, with the vast majority of their money ― slightly more than $8 million ― going toward Republican candidates and right-leaning causes. Overall, team owners from the four major American men’s leagues gave $23 million to Republican candidates and committees during the last election cycle ― 10 times more than they contributed to Democrats.
Just before the tax law passed, Sen. James Lankford (R-Okla.) pushed an amendment to end the stadium subsidy. But the Senate never adopted it.
“We’re really disappointed, and we’re not giving up,” Lankford’s spokesman told HuffPost. “We’re exploring other avenues in the Senate.”
This story has been updated to include Sen. Dean Heller’s comment.