Before we get to the weekly news roundup, a commenter asked me a question yesterday — I mean, I think they may actually have been trying to troll me, but it was in the form of a question — about how it could be better for Missouri to risk the Kansas City Chiefs moving to Kansas and losing all the tax revenue that comes with games. After initially going the “because economists say so” route, I tried to write up an actual detailed answer, and I want to include it here, because I, at least, found it instructive to see how quickly these kind of “sports stadium pay for themselves through economic activity” arguments fall apart once you subject them to actual math:
I found where your numbers are from, and they’re not from any economic impact study by the sports authority or an independent auditor or anyone else. They’re from a consultant hired by the Chiefs, who declared that the team and the stadium “generate $28.8 million in direct, indirect and induced tax revenue for the State of Missouri annually.” (The supposed $572 million is just “economic activity,” and the $28.8 million is the presumed taxes on that; if you include both, you’re double-counting.)
So, we already have Missouri spending $500 million in order to save $28.8 million a year, which would be a negative return on investment right there. But where does that $28.8 million figure come from? The Chiefs consultants, Econsult Solutions, only released a one-pager with no footnotes or other methodology, so we have no idea.
Most importantly, we have no idea if Econsult included money that would otherwise be spent elsewhere in Missouri if the Chiefs left. Is that all of it? No, of course not. Is it enough that it would reduce the $28.8 million a year in new taxes to a level where Missouri would be better off if the Chiefs left? Given that Missouri would be better off even if the real number were $28.8 million a year, yeah, that’s a near certainty.
But there’s an easier way to figure this out than guesstimating where people would be spending their money in some hypothetical situation: Look at cities that have gained or lost teams, and see what happens to local tax revenues. Innumerable economists have now done this, and found that the resulting losses are somewhere between 1) nothing and 2) next to nothing. (It’s actually worse than that: Some cities brought in *more* tax revenue without a team.) And that’s cities — the numbers are going to look even worse for states, since you can’t even make it up by stealing tax revenues from the suburbs.
No matter how you slice it, the numbers show that at the price points we’re talking about, $500 million and up, there is no way on earth for local governments to do better with the teams than without. You can wish it were otherwise — and team owners will certainly hire people to claim that it’s so — but good luck finding any data to support your case.
And now, on to the news:
- Speaking of economic impact reports, Washington, D.C. Mayor Muriel Bowser just released one for her proposed Commanders stadium that would cost the city upwards of $7 billion, and you’ll never guess who wrote it: That’s right, Convention, Sports & Leisure, everyone’s favorite Dallas Cowboys–and–New York Yankees–owned clown consultants! I have no plans to go over it in detail (though the page with the large heading spelled “MULTPLIERS” does stand out), but I am obligated to point out that the last time D.C. hired CSL to do a stadium study, it was immediately revealed that about two-thirds of the projected city benefits weren’t benefits at all, forcing the consultants to put out a letter “clarifying” that its 400-page report didn’t actually say what it said it said. That CSL they got hired again by D.C. to do their next big stadium study is either a sign that Bowser wasn’t paying attention in 2014 (when she was a city council member) or that stadium consultants aren’t getting hired for the quality of their work, but rather for how reliably they report what team owners and elected officials want to hear, yeah, that’s undoubtedly the one.
- Sports economist Geoffrey Propheter read far enough into the CSL report to find this knee-slapper: “Suppose I attend a conference in Denver, get a hotel room, and eat a Subway. According to CSL, the Subway gets to count my conference fees, room fees/taxes as economic impact. And so can the conference and the hotel. So now all my spending gets counted x3. Please stop being terrible at thinking.”
- The Chiefs and Royals owners may now have blank checks from the state for up to 50% of their stadium costs (or will once the Missouri state house passes the bill and Gov. Mike Kehoe signs it, which should happen soon), but they still want even more city and county money to pay for their stadium dreams, and that could require more public referendums. The Kansas City Star reports that the two teams are likely looking at separate ballot measures after a combined one failed spectacularly last April; no word yet on when these would happen, but the teams are clearly going to have to ask the state of Kansas to renew its offer of state money for stadium there beyond its June 30 expiration date, or else “We must outbid the evil barbarians from beyond the western realm!” is going to have somewhat less impact on election day.
- The plan by Ohio state senators who accepted tons of campaign donations from Cleveland Browns owner Jimmy Haslam to raid the state’s unclaimed funds account to borrow money for a Browns stadium may be stoking outrage from residents about what one called “legal theft,” but it’s doing wonders for publicizing the existence of the unclaimed funds and getting Ohioans to start claiming them.
- Also, the Browns’ stadium hasn’t even been approved yet, and it’s already racking up cost overruns: The city of Brook Park just asked for $71 million in state road improvements for the planned stadium site, on top of the $1.2 billion in public money that’s already been proposed.
- Want to read an article about how a min0r-league baseball stadium has “revived a struggling downtown” in a South Carolina city, while quoting only the mayor, the team owner, and the stadium developer? Sorry, I’m going to link to it anyway.
Speaking of minor league baseball stadiums, a House Subcommittee is hosting a hearing on that subject on Tuesday:
INNOVATION, ENTREPRENEURSHIP, AND WORKFORCE DEVELOPMENT SUBCOMMITTEE HEARING: “Beyond the Ballpark: The Role of Minor League Baseball in Economic Growth”
DATE AND TIME: Tuesday, June 10th at 2:00PM ET
LOCATION: Hearing Room, 2360 Rayburn House Office Building
https://smallbusiness.house.gov/calendar/eventsingle.aspx?EventID=407247
Thanks for sharing this. I would have missed it.
Looks like it’ll be livestreamed here:
https://www.youtube.com/@HouseSmallBiz/streams
Are there any links to the studies showing tax revenues remained flat (or even increased) after teams left cities?
Thanks in advance.
There are a couple relevant studies in the Data tab. Here’s one on per-capita income being flat or increasing when teams leave:
https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-9906.2011.00597.x
And here’s one on sales tax revenues being flat when sports teams stop play temporarily during labor conflicts:
https://college.holycross.edu/hcs/RePEc/spe/BaadeBaumannMatheson_Strikes.pdf
Will keep looking for a study specifically on tax impacts of teams moving, pretty sure I’ve seen one.
Here’s one on sales tax receipts going up in Irving when the Cowboys moved to Arlington:
https://bsky.app/profile/gpropheter.bsky.social/post/3lqfli56iws2d
And here’s one on taxable sales in various Florida metro areas that got new sports teams – there was no measurable correlation between new teams and consumer spending.
https://www.semanticscholar.org/paper/Selling-the-Game%3A-Estimating-the-Economic-Impact-of-Baade-Baumann/fc415177f273b8de089cc22328f49aa16a773515
That was my first thought when I heard about the Ohio unclaimed funds account, “have I ever worked in Ohio?”
If you’re serious, you should check the unclaimed funds account for any state you’ve worked in.
Illinois in particular does a lot of outreach/advertising encouraging people to search their name in the unclaimed funds database
I can tell you from experience that the Minnesota unclaimed funds is easy to search for your name or loved one and then request the funds.
That hire wasn’t a “screw up” by the DC pols. They set out explicitly to hire a firm that would crank out the type of numbers that would look good to the type of people they want to impress (themselves included) and would also mesmerize the type of people who simply don’t know any better. That the “math” involved falls flat on its face under even the slightest of pushbacks is beside the point.
Yep. These things never happen by accident.
If the Chiefs are moving just across the state line (which is about 15 minutes from Arrowhead) it stands to reason that all Chiefs related activity would move over with them. It’s not like we’re talking about them moving to Toronto, forcing Chiefs fans to find something else to do. Some will have to drive a few more minutes.
You would think that, and yet it’s not what the data shows for when teams move to a neighboring jurisdiction. When the Atlanta Braves moved from Fulton County to Cobb County, for example, Cobb only received about $3m a year in new sales tax revenues — which wasn’t any more than the increase at the same time in neighboring counties that didn’t have the Braves.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3802875
This seems counterintuitive, but there are reasons. First off, spending “related to” stadiums is often overcounted — if someone goes to a ballgame and stays in a hotel room, the hotel taxes are counted as stadium-related, even if the person was already in town for other reasons and just happened to take in a game. Secondly, there’s the crowding out effect: This is the “nobody goes there anymore, it’s too crowded” problem, where people are more likely to avoid an area on days they’d have to fight through game traffic. It’s not enough to completely eliminate the sales tax benefits of stealing spending from neighboring jurisdictions — $4 million is $4 million — but it is enough to put a big damper on it.
If the proposal on the table in Missouri were to spend, say, $100 million each on Royals and Chiefs stadiums, it would be worth estimating the actual tax benefits and seeing if they’d be enough to make it worthwhile. At a price point starting at $500 million each and likely going closer to $1 billion once city and county spending is included, there’s no possible way Missouri won’t be bathing in red ink here.
There’s also talk about collecting the players state income taxes. Which would just be what they’re paid for a home game.
But a lot of players actually live in Kansas now. So their income from endorsements would already be subject to Kansas state income taxes.
I agree, if the subsidy was $100 millionish, maybe you could analyze it to show some kind of benefit, at $500+ million it’s clearly a waste of public dollars.
These metro areas consisting of multiple states just seem ripe for owners to take advantage of the public. Ultimately I don’t think New York City suffers that the football stadium is in New Jersey, nor do I think New Jersey benefits that much. If anything New York City benefits in that New Jersey Transit is responsible for the public transportation. But It all seems like a wash at best.
Endorsement money may be paid to a player in the offseason when he lives in Florida, Texas, Arizona, California, or Latin America for warmer weather. Those are likely the legal residences for most players.
As for game salaries, I would bet many of the high salary players get paid through a tax sheltered charitable foundation to avoid taxes.
Agreed Jeremy. I would be shocked if any player not on a rookie/entry level deal doesn’t have at least 60-70% of their income tax sheltered.
On a $200m overall payroll, I would expect a state with a 12-15% income tax rate to receive no more than $5-7m in revenue, not the $25-30m some might expect
No states have anything close to a 15% income tax rate bracket.
As far as tax schemes go, players are employees getting normal pay stubs. Those weird deals where the team pays money thru a charity doesn’t really happen (that’s not to say their non playing pay isn’t protected like that).
This leaked paystub kinda shows how it all works.
https://www.sbnation.com/lookit/2015/5/22/8647279/andrew-mccutchen-pay-stub-picture-taxes-deductions-money
Also generally with the NFL established players live in the market they play in, usually close to the practice facility. Players with families don’t want to be away from their kids, who are in school during the season. Also with training camp starting in the summer and the season running thru January plus playoffs- it would be difficult to prove residency elsewhere for a tax benefit. This is also generally true for NHL and NBA.
With baseball there’s less overlap with school, oftentimes players have a home near their teams spring training facility, so Florida or Arizona. No income tax for Florida, relatively low in AZ. That helps with their non-playing incomes. Some players keep their families in other cities they don’t play in outside of FL or AZ.
On the contrary, Al….
Five states have a top MTR between 10-15% as of 2022.
We are talking about pro athletes here, not casual employees at a convenience store.
https://en.m.wikipedia.org/wiki/State_tax_levels_in_the_United_States#/media/File%3ATop_Marginal_State_Income_Tax_Rate.svg
….and some more current info…. The number of states with a max MTR of 10% and up is growing…..
https://www.tax-rates.org/taxtables/income-tax-by-state
Not a single state has a bracket that gets to 15%. Also in most cases, that upper California bracket really only affects players playing home games in California (or possibly if you share a division with California teams).
A Major League Baseball player making $10 million per year is making about $60,000 per game. If he’s not on a California team (who play approximately 100 games in state), he’s probably playing 20ish games in California. He still could be under the threshold for that higher rate, iv seen it at $1.2-$1.4 milllion depending on marital status, Head of Household. So no most MLB players aren’t reaching the upper bracket of the California state income tax system. NBA players might, especially western conference teams. Maybe a handful of NHL players.
The annoying state for pro athletes is actually Oregon with their 9.9% on income over $125,000. Cuz pretty much every NBA player making over $12 million per season is going over that. Steph curry on his max contract is paying the state of Oregon over $50,000 for the right to play at the blazers.
Pro athletes don’t have the loopholes that other rich people do. They are salaried employees. There is no equivalent of the carried interest loophole for pro athletes like there is for hedge fund managers. When Warren Buffet argues for tax reform he specifically states that investment managers should be paying the same rates as athletes do. Now, some can do things like the Jays did with Vald Jr’s signing bonus, so he pays Florida taxes on that part of his salary or Othani getting the bulk of his salary after he is no longer a California resident.
In fact, they have many, many loopholes. They may or my not take advantage of the option to set up their own foundation or other charitable organization to shelter their income, but that doesn’t mean it isnt an option for them.
The paystub referenced above simply shows the tax deducted at source…. Just as mine does before adjustments at tax filing time.
Sadly I am not in Mr. mcutcheon’s income bracket, but I still get more than a third of what I pay at source back at filing. Sometimes closer to half.
And I am just a guy. Somebody making a million or more a year can hire much better accountants than I can
I don’t disagree that stadium related spending isn’t accurately counted. However, I’m just saying if a stadium moves from one spot to another in the same metro market the spending will move with it, in the case of football, it might not in the case of other sports that have most of their games during the week.
For example, I lived a half hour west of downtown Cleveland. The baseball, basketball, and football stadiums were all downtown. So if I were going to a baseball or basketball game after work I would walk to the stadium and then have my usual half-hour drive home after the game. Football I drive down on Sunday.
Now if either the baseball or basketball team moved 20 minutes east, I would have been a lot less likely to go to games after work because it would mean a 20-minute drive, paying to park, and then my drive home would be 20 minutes longer. Whereas if the Browns moved 20 minutes east sure it would be annoying that my drive is 20 minutes longer but I’m still doing the trip because football is on Sundays and you make a day of a football game as opposed to a night out.
If the Royals moved across the border there would probably be people on the Missouri side who make the trip less often and that may or may not be offset by people on the Kansas side who make it more often (I’ve never been to KC so I don’t know their dynamics), but if the Chiefs moved I don’t think anyone is going to make a stink out of the extra 15 minutes it may take them to go.
So if the number is $500 million or $100 million or $5 or whatever it is its moving over with the Chiefs.
Now if the Chiefs moved to Dallas, or Toronto, or Greensboro, sure people in KC would probably find other things to do with their money but if they move 10 minutes away they are going to follow.
I can personally attest to the “crowding out effect.” I live on the edge of downtown St. Paul, MN about a 10-minute walk to the Xcel Center where the MN Wild play. On game and/or concert nights I will avoid the area and tell my friends to avoid the area restaurant/bars as they are too crowded, traffic is rough, parking at a premium, etc.
I once talked to a guy who owned a restaurant near the (then) St. Louis Rams stadium, and he said he closed on game days because it was impossible to seat even a fraction of the 50,000 people pouring by in the span of 30 minutes, and his regular customers steered clear because of the traffic.
There is definitely going to be some spending that travels across the border with a team if it changes jurisdictions. But what the economic numbers show is: It’s not as much as you might think, and it’s certainly not enough to justify building a whole new stadium just to keep it local.
The Ram’s stadium was literally a 5-minute drive from Illinois. So if the Rams had moved there, maybe that guy probably would have been able to operate the same way he would for Rams away game. Some of the economic activity would have stayed in St Louis. Like some of the out-of-town travelers would probably have stayed in hotels on the St Louis side, and some of the locals might have parked on the St Louis side and walked or taken a shuttle over the bridge.
So while some of the economic activity would have remained in Missouri (similarly, some out-of-town travelers might still stay in Missouri or go out to dinner there the night before), the point still remains that football-related spending would still be spent on football it would just be moved around.
Regarding avoiding areas where a game is taking place, it depends on if that visit is canceled or just done on a different day. For example, I wouldn’t take my kids to the aquarium in Toronto when there is a Jays game but that just means I pick a different weekend.