As Hurricane Katrina has forced the NBA’s New Orleans Hornets to play in Oklahoma City, the state of Oklahoma, trying to be seen as supporting a professional sports team, has decided to exempt ticket purchases for the Hornets’ games from its state 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. . From Sports Illustrated:
Tickets for the Hornets will be exempt from state sales 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. under a bill Gov. Brad Henry signed into law Monday as state officials work to make Oklahoma City more attractive as a permanent home for the NBA team. The Hornets have committed to play most of their home games here this season and next because of damage Hurricane Katrina did to its home city of New Orleans.
“This law is important because it allows us to continue to offer our fans in Oklahoma City the most affordable tickets in the NBA,” team owner George Shinn said at a news conference. Tickets to Hornets’ games start at $10.
Henry said he hopes the Hornets will stay. (Full Story)
The obvious and simple question is why should the state of Oklahoma give special tax preferences to professional basketball? By providing this exemption on basketball tickets, while maintaining the sales tax on other goods and services, the state is creating a distortion for consumers, leading to overconsumption of NBA tickets relative to other goods. While this may be the goal of the policy, not only should the question of priorities be asked, but other questions need to be asked as well, like whether or not this will really achieve the goal of keeping the team in Oklahoma and if so, what benefits of a pro basketball team remaining in the state would even exist.
One thing is for certain: The empirical evidence is clear that sports teams are constantly over-rated in terms of their economic significance. In nearly all cases, the costs (including opportunity costs) of providing government assistance to professional sports franchies are not worth the benefits.
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