Stadiums and Tax Policy: A Winning Combination?

June 3, 2005

Currently, Indiana is attempting to raise taxes to fund a new stadium for the Indianapolis Colts. To fund the $600 million construction of the stadium the Governor proposed raising the following taxes (read the article in the Indy Star here):

• Hotel taxes: Marion County hotel tax increases to 9 percent from the current 6 percent. This is on top of the 6 percent state sales tax.

• Car rental taxes: Marion County car rental tax would double, to 4 percent.

• Restaurant taxes: Marion County would double its food and beverage tax, to 2 percent. Meantime, neighboring suburban counties are expected to implement 1 percent restaurant taxes, giving half to the stadium and keeping the other half.

In general, studies find that publicly funded stadiums are poor economic policy. See the studies:

http://www.brook.edu/press/review/summer97/noll.htm http://www.aeaweb.org/jep/contents/Summer2000.html#siegfriedhttp://research.umbc.edu/~coates/work/v698.pdf http://www.cato.org/pubs/briefs/bp89.pdfhttp://www.heartland.org/pdf/madness.pdf

The Colts are a privately owned company. A stadium is an essential part of their “production process” and plays a large role in the product they produce. It’s hard to see why they shouldn’t be required to cover the full cost of their operations. For more about athletics and taxation, see the Tax Foundation’s Jock Tax paper.


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