One of the basic concepts that economists and budget experts like to try to point out about sports funding deals is that taxes are fungible — that is, if you don’t use them on a stadium or arena, you can use them to pay for something else. So if your city is, oh, I dunno, proposing to funnel off hundreds of millions of dollars in stadium sales taxes and car rental and hotel taxes on the grounds that those are “tourism-related,” it’s important to remember that once you give that money to the owner of the local sports team, you can’t use it for anything else.
Which brings us to Detroit, where local politicians and budget watch groups are looking at a common means of funding sports venues — a ticket tax — but for a very different use:
A new Citizens Research Council of Michigan study found an admissions tax on Detroit sports and entertainment venues could raise between $14 million and $47 million annually, depending on the tax rate. … The extra revenue could offset a property tax cut between 1.7 and 5.7 mills.
Detroit is one of only a handful of cities without a ticket tax, notes the report, and there’s a reason for that: The city used to impose a 10% tax on tickets at Joe Louis Arena when the Red Wings played there, but that was eliminated as part of the deal giving team owners the Ilitch family a new arena plus $261.5 milion in state and city funds to build it, plus $400 million in subsidies for development around the arena, plus another $783 million for in subsidies for more development when the first development didn’t happen, plus possibly another billion dollars more. Clawing back $47 million a year from a new 10% ticket tax wouldn’t make Detroit taxpayers whole on all the tax money they’ve pumped into sports projects (including those for the Tigers and Lions) over the years, but it would at least be a start.
All the ticket tax talk is being spurred by a mayoral race between council president Mary Sheffield, who favors one, and pastor Solomon Kinloch Jr., whose position appears to be that it’s a bad idea because Sheffield came up with it. (Both Sheffield and Kinloch, incidentally, have expressed enthusiasm for continuing to hand out tax breaks in order to promote development.) It does at least look like there’s nothing in the teams’ leases that would block such a tax — Bridge Detroit reports that if the state legislature passed a law allowing cities to impose them, then the city council enacted an ordinance, then a majority of Detroit voters approved it, it could happen.
The report does also raise the issue of whether it’s fair to create higher ticket prices in order to fund city priorities, but doesn’t appear to have examined whether in other cities that have ticket taxes, team owners have largely ended up eating the cost because they’re already charging the most that the market will bear, as economists project that they should. I did some initial asking around and found that while it’s really hard to calculate the effects — if a new stadium opens with a new ticket tax and prices soar, who’s to say if it’s the fault of the tax or of all the shiny new cupholders? — the best study of this appears to be by Stefan Szymanski of Soccernomics fame: He looked at what happened when to soccer ticket prices when the United Kingdom added a 10% VAT sales tax in 1973, and found that around 25% of the cost was passed through to ticket buyers.
More research needed, clearly, but this supports the general idea that ticket taxes mostly hit the wallets of sports team owners, unlike other taxes that can be passed along more fully to regular consumers. Whether ticket taxes should be used for property tax relief is another question, but at least we can dispense with the idea that this would be charging sports fans to bail out property owners — it would mostly be charging sports team owners to do so. Michigan and Detroit legislators and voters, take note.