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Over the weeks leading up to the Super Bowl, the National Football League (NFL) has found itself increasingly under scrutiny for its extraordinary extraction of lavish tax breaks and subsidies from state and local governments throughout the country. In fact, one recent study estimated that the National Football League (NFL) receives as much as $1 billion in subsidies annually.
While state and local governments find themselves still struggling with austerity budgets, the NFL had revenues of $9 billion during 2013 and analysts expect its revenue to only rise in the years to come. In addition, the NFL’s overall profitability is rising and its operating margin is “head and shoulders above other sports.”
Given their lack of funds and the league’s high profits, why do state and local lawmakers feel the need to give extravagant subsidies to NFL teams? One of the main reasons is that NFL teams have frequently threatened to leave a given city if they do not receive the subsidies they want, typically for constructing or maintaining a stadium, and many lawmakers fear that voters will blame them for “losing” the team if they do ultimately move.
On top of this, proponents of the subsidies often produce studies purporting to show that the city or county’s economy will substantially benefit from the team and its stadium, even when accounting for the cost of the subsidies. According to Gregg Easterbrook, an expert on these deals, such claims simply do not “stand up to scrutiny.” The reality is that stadiums are a particularly poor economic investment because NFL teams only play about 8 regular season home games a year, whereas roads and bridges or even other businesses help the economy of a region all year round.
While many lawmakers are taken in by the arguments for the subsidies, the good news is that the general public now understands that subsidizing the NFL is simply not worth it in terms of “keeping” the teams or the economic benefits. In fact, a recent poll found that 71% of Americans opposed using tax breaks to attracts or keep a football team in town and 69% oppose the use of public funds to build and support stadiums for NFL teams.
On the federal level, there has been a lot of attention paid to a push by Senator Tom Coburn to remove the NFL’s (and other sports associations’) tax exempt status, which he claims allows the league to receive millions in unwarranted tax breaks. In truth, the tax exempt status only applies to the league’s organizing entity, which actually reported losses in recent years and is not currently being utilized as a “tax avoidance mechanism” according to tax experts.
Even if changing its status would cause the league to pay some additional taxes in the future, this amount will be a pittance compared to how much it receives in tax breaks from state and local governments, where the real tax avoidance is taking place.