The Spillover Benefits of Pro Boxing?

July 18, 2005

The argument for tax subsidies is usually couched in terms of positive externalities. Policymakers argue that activity X generates benefits that “spill over” onto other parties, and should therefore receive subsidy Y to encourage the efficient level of the activity.

However, for many tax handouts the rent-seeking nature is abundantly clear. Case in point: St. Louis’ new tax subsidies for professional boxers. From the St. Louis Post-Dispatch:

Seeking to make boxing a main event in St. Louis, the Board of Aldermen on Friday approved a bill that allows fight promoters to duck city taxes…

“Forget the rope-a-dope argument. Get in the middle of the ring – and bring boxing to St. Louis,” Alderman Stephen Conway, the bill’s lead sponsor, told colleagues.

Does pro boxing generate positive externalities? It’s hard to see how it could, unless the concept of externalities is expanded beyond recognition to include the impact of nearly any economic activity on any other activity in society. Predictably, many St. Louis commentators have criticized the city’s new plan:

Board President James Shrewsbury argued that giving tax breaks for boxing will lead others to ask for the same relief.

“What do you think they are going to do when this bill passes?” said Shrewsbury, one of only five aldermen who opposed the measure. “This is bad public policy. What we are doing here is giving away general revenue and getting nothing in return.”

Read the full piece here.


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