Just noticed the op-ed in yesterday’s New York Times arguing that the tax deductibility of luxury boxes has ruined baseball:
Over the last two decades, the average ticket price for a Chicago Cubs game has increased 265 percent, more than four times the inflation rate. Add in parking, concessions and souvenirs, and a family trip to one of this week’s opening day games could easily cost a few hundred dollars.
There are many reasons for the price explosion, but a critical factor has been the ability of businesses to write off tickets as entertainment expenses — essentially a huge, and wholly unnecessary, government subsidy.
These deductions have led to higher ticket prices in two ways. On the demand side, they have fueled competition for scarce seats, with business taxpayers bidding in part with dollars they save through the deductions.
On the supply side, the large number of businesses bidding for expensive seats has driven the expansion of luxury skyboxes and a reduction in overall seats in new ballparks.
It’s an issue I’ve raised before, and Joanna and I noted it way back in the first edition of our book. The deductibility of sports tickets has bounced around a bit — it’s currently at 50% of the face value of tickets — but it remains a huge incentive for corporations to pay more than they otherwise would for tickets, driving up prices overall — and helping spur teams to demand new stadiums with more luxury seating that they can sell to the artifically inflated corporate market.
The op-ed authors, Duke law professor Richard Schmalbeck and Rutgers business professor Jay Soled, argue that while it would be ideal to eliminate the business-entertainment deduction for sports tickets entirely, probably a more feasible reform would be to cap the deduction at $50 per seat. That wouldn’t end the juicing of ticket prices, but it would at least blunt it somewhat.