Virginia lawmakers have made a $2 billion proposal for a new arena for Monumental Sports & Entertainment, the owner of the Washington Wizards and Washington Capitals, in Alexandria, Virginia, which Gov. Glenn Youngkin (R-VA) supports. Meanwhile, District of Columbia Mayor Muriel Bowser has announced her own $500 million counteroffer to keep the teams in downtown D.C. while blaming budget constraints for her decision to withhold a planned $39 million contribution to Supplemental Nutrition Assistance Program benefits for the district’s low-income families.
The announcements, which were made in December 2023, have sparked heated debate in D.C. and Virginia over whether to divert public resources away from public priorities to entice billionaire owner Ted Leonsis or whether private financing instead of taxpayer funds should be used for either facility.
There is precedent for private funding for a new sports facility in the D.C. metropolitan area. In 1992, then-Washington Redskins owner Jack Kent Cooke spent $180 million of his own money to move the team from Washington, D.C., to FedExField in Landover, Maryland. Ironically, he moved the team there after then-Rep. Jim Moran, the former Alexandria mayor, fought then-Virginia Gov. Doug Wilder’s plan to move the Redskins to Alexandria.
Efforts to reform or restrict the use of taxpayer funding for sports facilities include the bipartisan No Tax Subsidies for Stadiums Act, introduced as HR 993 by Rep. Earl Blumenauer (D-OR) and as S.392 by Sen. James Lankford (R-OK). The bill amends the Internal Revenue Code of 1986 to ensure bonds used to finance private athletic stadiums are not given the same tax exemption as municipal bonds meant to fund public infrastructure.
Taxpayers at all levels of government currently subsidize professional sports franchises throughout the country. The federal tax loophole for professional sports stadiums has resulted in almost $4 billion in foregone federal income tax revenue since 2000, despite studies that repeatedly show public subsidies for sports stadiums do not generate significant economic benefits for the nation or local communities. The subsidies not only fail to create seriously overestimated economic returns but also drain public coffers of resources that could be used for more efficient programs and services.
The No Tax Subsidies for Stadiums Act would not prevent professional sports teams from building new stadiums or issuing debt instruments to finance them. Teams simply would have to finance these projects using private money rather than a federal tax carveout to entice state and local public subsidies. While state and local governments provide the bulk of public dollars flowing to these franchises, eliminating the federal tax subsidy would reveal the full cost of stadium projects and dissuade many states and localities from contributing.
Stadium subsidies, like any other form of corporate welfare, compound the waste of taxpayer money by encouraging recipient businesses to take greater risks with public funds than they would if they had only their own money on the line. They inflate investment bubbles by distorting the market’s price signals about the supply of and demand for financing that exist to point investors toward greater returns in other markets, which stifles the innovations that would result from allowing capital to flow to its most productive uses. Ending tax subsidies for stadiums would level the playing field for other debt-financed investments, such as corporate bonds that fund construction and expansion of commercial manufacturing and distribution plants across many industries.
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Public stadium financing unjustly picks winners and losers in the marketplace. Team owners, some of whom rank among the world’s wealthiest people, can afford to finance their own stadiums without handouts from taxpayers. Subsidies disproportionately benefit these team owners and their consultants, not the taxpaying public.
Lawmakers in Washington and elsewhere should do the right thing by helping entrepreneurs create jobs by prioritizing bottom-up, pro-growth regulatory reforms instead of slapping the “economic development” label on top-down corporate handouts. Ending the tax-exempt status of municipal bonds that finance professional sports stadiums would save taxpayers money, encourage investors to shift toward more productive industries, and discourage local officials such as Youngkin and Bowser from wooing teams by raiding the public treasury.
Alec Mena is a state government affairs associate for Citizens Against Government Waste.