Well, this is kind of interesting. Apparently, as part of the talks in Washington to reduce the deficit and avoid the “fiscal cliff” (which isn’t really a cliff, but that’s an issue for another time), consideration is being given to reducing or eliminating the tax-exemptness of tax-exempt municipal bonds, which are only one of the key government subsidies driving the last 25 years of stadium building, something that Congress was concerned enough about to actually take the extreme measure of asking me to testify about it.
Tax-exempt bonds are one of the more abstruse elements of the stadium-subsidy game, but in a nutshell, here’s how they work: A city government wants to sell bonds to fund a big construction project. The IRS says, “Hey, you’re a city government, you deserve a break. How about we don’t charge bondholders any taxes on the money they make on the bonds?” The city responds, “Cool! If bondholders don’t have to pay taxes, they’ll accept a lower interest rate! And that saves us money!” And everybody goes home happy, except for the federal government, which is suddenly out a lot of tax money — to the tune of $146 million a year. (State and local governments take a hit as well, but given that state and local income tax rates are usually pretty low by comparison, it’s a vastly smaller one.)
Now, tax-exempt muni bonds are used for all sorts of other things — parks, libraries, stuff like that with an actual public purpose — that would also suddenly become more expensive to build if the tax break suddenly evaporated. But it is interesting that a stadium tax loophole that many people have been complaining about ever since it was accidentally enshrined into law in 1986, but haven’t been able to do much about, is suddenly on the table thanks to a completely unrelated fake crisis. Given the lobbying power of both local legislators and developers, probably nothing will come of it, but it bears watching nonetheless.