That Missouri state hearing to talk about the economic benefits of a St. Louis Rams stadium but not whether Missouri should build a St. Louis Rams stadium happened yesterday, and the Missouri Department of Economic Development held up its end by bringing along a report claiming to show that the state would earn a net $295 million in added tax revenue over 30 years:
The biggest chunk of the money would come from personal income taxes paid by football players, staff and coaches. They will pump an estimated $9.6 million into state coffers this year, an amount that is projected to grow by at least 3 percent a year and probably, “significantly” more.
That’s $9.6 million in just state income taxes, over and above what the state gets now? The top tax bracket in Missouri is 6%, so Rams players and staff would need to be paid an extra $160 million to make that work out, this for a team whose entire player payroll currently is only $151 million. Also, as committee chair Jay Barnes pointed out, Rams state income tax payments have actually been going down the last two years, to a total of $17.8 million in 2014.
There are other problems with the report (which doesn’t appear to be publicly available yet), including that it estimates only $12 million a year in state debt payments, when currently subsidy plans would require at least double that; and that it doesn’t appear to have calculated the negative economic impact of saddling Missourians with either $24 million a year in new taxes or in lessened spending on other projects. Mostly, then, it tells us that Gov. Jay Nixon looks to be preparing to justify spending money on an NFL stadium by going down the path of Wisconsin Gov. Scott Walker: Athletes make a lot of money and keep making more money so let’s make sure they stick around by taking all the income tax they pay and giving it back to their employers and then everyone will win! It makes total sense, so long as you don’t think about it too much.
If it is a development agency, I can guarantee you the people who work there are cheerleader idiots who wouldn’t understand a rigorous economic impact analysis of a lemonade stand, much less a large project.
If my time in the economic development world taught me anything, it was that the people in economic development, and frankly even the faculty at the Universities who write EIAs have little to no idea what they are writing about and/or are actively liars.
Look this $100 million investment in the zoo makes sense because without an upgrade to this one exhibit the entire zoo will go away and everyone who goes to it will no longer come to the state or spend any money here! Ignoring the fact that the zoo is:
Mostly attended by people from in-state
That almost all of the people who go to the zoo are doing other touristy things too, almost no one comes to the state solely for the zoo.
That crediting the full amount of the spending of these people to the zoo is so disingenuous as to be outright lying.
It makes me so angry I could strangle someone.
That’s $9.6 million in just state income taxes, over and above what the state gets now? The top tax bracket in Missouri is 6%, so Rams players and staff would need to be paid an extra $160 million to make that work out, this for a team whose entire player payroll currently is only $151 million. Also, as committee chair Jay Barnes pointed out, Rams state income tax payments have actually been going down the last two years, to a total of $17.8 million in 2014.
If the top income tax rate is 6% and the payroll is $151 million, how could $17.8 million have been paid in 2014 as 6% of $151 = $9.06 million.
Furthermore, professional athletes pay state income taxes in the state where they play each game, so unless the Rams are playing all 10 of their away games in Kansas City, that is not happening. So only about 50% of the payroll is taxed in Missouri.
When you have friends like this, who needs enemies?
Regarding my comment:
“Furthermore, professional athletes pay state income taxes in the state where they play each game, so unless the Rams are playing all 10 of their away games in Kansas City, that is not happening. So only about 50% of the payroll is taxed in Missouri.”
But I guess it all ‘comes out in the wash’ in terms of total state taxes, since the visiting players are paying Missouri state taxes.
Scott Myers: The point is partially that 10 games will be played in Missouri. While Rams players will only pay income tax on the 10 games they play in Missouri, the opposing teams will have to as well. As the salary cap results in most teams having a payroll that approximates each-other, you still would collect income taxes on approximately the full amount of payroll.
The tough argument on this the “what if” scenario. Yes, the state of Missouri already collects income tax on the current ~$150m or so. But if a new stadium isn’t built, that revenue stream will completely go away. Therefore, one could argue that the new stadium income tax revenue is completely additive to the state coffers when you consider that the only available alternative is getting nothing. I’m not saying the stadium is a deal for the taxpayers, but I understand the argument.
Kevin: Right, but the portion of the players’ salaries that is paid by Missourians could result in increased income tax elsewhere if the Rams left. (If they go to out to eat more often, those restaurateurs would pay more in income tax, etc.) It’s not a 100% substitution by any means, especially when so much of the NFL’s budget is underwritten by people sitting on their couches in Missoula watching national games on Fox, but it’s something.
In fairness to Missoula: there are plenty of things to do besides getting fat watching the most boring professional sport ever on the worst TV network since Filo Farnsworth powered up the first tube. But yeah, people do watch the NFL anyway don’t they
Neal: I absolutely agree with you there. Probably 40% of the player/coaches/exec income (my VERY high level guess) is generated from direct ticket sales, concessions and memorabilia. there certainly would be a substitution effect. To what degree is certainly the question. Then there is the outside travel question. Many people travel to St. Louis and stay in local hotels simply for the football game. If the team left, that revenue wouldn’t be substituted elsewhere in the city, unless the lack of a team opened up a venue for other events. I don’t think that is the case here.
A good chunk of it would be substituted elsewhere in the state, though.
Substitution is really hard to calculate accurately, but it should be possible to guesstimate it with some large error bars. I may see if I can rope someone with more econometric chops than me into helping figure this out.
We gonna “git ‘er done” in Missouri, kids. Yeehaw!
Kevin,
The argument would make more sense if the State weren’t spending way more than the player income taxes to build/maintain/rebuild stadiums in the St. Louis area. In a broad sense, that player tax money never gets to the general fund because the “prestige” of having a team is so expensive. Whether the money is there or not, it really doesn’t benefit Missouri taxpayers now and probably never will in the future.
Again, though, this is an example of cherry picking a single piece of data out of the “Rams” total tax related impact to the state.
This is akin to saying that Missouri should not only let the Rams leave but forcibly evict them because the state loses (as an example) $10M in corporate taxes because in-state corporations can expense the cost of their luxury boxes and other NFL related expenditures that would otherwise be ‘taxable revenue’
Someone else will say “yes but those in stadium expenses generate fees and taxes (and wages) on which the state also derives tax revenue”…
Then another person will say “Not so fast, those corporations might spend that entertainment dollar anyway…”
And then… “But that spending might be done out of state, or might be done at a business in state that has a higher net taxation rate than an NFL franchise does on balance so…. um, err, I dunno”
You can see how the whole cherry picking data thing works out… and this is why learned economists often can’t agree even on whether a particular plan will be revenue positive or negative for it’s sponsor.
Something not mentioned is city tax. The city of St Louis has a 1% income tax. At the $151 million the article states that’s an extra $1.5 million annually.