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Stadium Subsidies Still Popular Despite Budget Crunches

2 min readBy: Joseph Bishop-Henchman

Andrew Moylan of the National Taxpayers Union writes in Budget & TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. News about stadium subsidies:

According to Neil deMause, author of Field of Schemes, an exposé on stadium subsidies, New York City taxpayers paid a whopping $1.8 billion in subsidies for construction of the stadiums, despite the franchises being worth more than $2.1 billion collectively. The teams pitched in just over $800 million.

Soon after New York officials dispensed those enormous subsidies, the bottom dropped out of the city’s balance sheet. In May of this year, Mayor Michael Bloomberg (R) unveiled a budget loaded with tax hikes to close a gap threatening to approach $5 billion in 2011. He called for a hike in the city’s already-high sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. , plus a 5 cent fee for every plastic grocery bag used in the city.

Meanwhile, as California’s state budget situation began crumbling into a looming $21.3 billion deficit, the city of Santa Clara recently inked a deal promising more than $150 million in taxpayer money to help build a stadium for the National Football League’s San Francisco 49ers, a franchise worth nearly $800 million.

It can be quite a sum, and we of course described how New York City and federal taxpayers footed the bill in a hidden way for the Yankees’ new stadium:

First, the new Yankee Stadium will be city-owned and thus exempt from property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. es. Meanwhile its primary tenant, the Yankees, will pay no rent. This clearly brings up the issue of whether such tax-exempt bonds should have been issued at all, and especially when the city is so far in the red.

Secondly, to pay off the bonds over time, New York City will receive payments theoretically equivalent to the property taxes that Yankee Stadium would otherwise pay. The city claims that these payments in lieu of taxes (PILOTs) equal taxes that would otherwise be owed. In reality, these payments are inflated by overvaluing the stadium property by three times that of comparable property. By inflating the payments in lieu of taxes, the City can say to taxpayers that the Yankees are paying a significant part of the stadium’s cost, while telling the IRS that the City is paying for almost all of it.

Read the rest here.