May 24, 2004

Tax me out to the ballpark

By: Matthew Hisrich

Spring and baseball are a much better combination than spring and taxes. Thanks to politicians we have both. Worse, many politicians seem to think that baseball and taxes are an even better combo. Whether the taxes are to support locally owned teams or over-the-top stadiums, people are becoming all-too-familiar with attempts by public officials and civic boosters to pull the wool over their eyes with such bum deals.

That means that public officials have to become better at giving you a little for a lot. A recent proposal in Ohio, for instance, suggests that residents can have a new stadium without contributing a penny in new taxes. A closer look at the idea reveals that what might be going on is simply a more advanced form of shell game. Whether or not new taxes will be necessary remains to be seen, but either way one thing is sure: Ohio taxpayers will be footing the bill.

A natural tendency in politics involves trying to win votes by handing out favors while at the same time not losing any votes from the people who have to pay for the favors. People love gifts, but taxes are never popular, so public officials often try to find ways to give one without raising the other. This usually involves tinkering with budgets or issuing debt for future generations to pay off.

If a politician must resort to new or higher taxes, there are two reliable methods. The first is to try taxing those who cannot vote against you. The second is to spread the pain out as much as possible while touting the wonderful new things to come once the cash starts rolling in.

In Cleveland, for example, Mayor Jane Campbell is trying the former approach. She would like suburbanites to help pay for the failing schools in her city. This pirate method, known as “taxation without representation,” is the kind of thing people in America have been willing to start wars over.

Much more standard here is the “dispersed costs, concentrated benefits” model. This involves everyone chipping in a few cents to make a small group of people happy. In Columbus, the happy people will likely include businesses that, for a relatively small investment, can entertain clients in snazzy boxes occupying the prime locations in the stadium.

According to Columbus Partnership president Robert H. Milbourne, “There is no reason we can’t finance a $40 (million), $45 million facility without asking the taxpayers to pay locally.” The money, he says, can come from private sources and state funds.

He has good reason to believe the state, at least, might come through. Sending good money after bad is a well-established practice in a lot of state budgets, and Ohio has already allocated money towards a new or improved Cooper Stadium in Columbus. In fact, $350,000 has been appropriated to study relocation of the stadium and $10 million to develop one of the possible locations.

If this occurs, then taxpayers all across Ohio will be helping to cover the cost of a new minor league baseball stadium for Columbus. In addition, if state-local bonds are used to finance construction, their tax-exempt status at the federal level means that taxpayers all across the country have to share in the burden. The drive for state and local governments to build new complexes is hardly something the federal government needs to be encouraging.

Proponents of sports stadiums love to tout the economic benefits resulting from their construction. Time after time though, in Ohio and elsewhere, these claims fail to materialize. Part of the problem is that economic impact studies rarely factor in a major cost: the negative impact of pulling money out of the economy to spend on a stadium. As economist Ludwig von Mises pointed out in his book, Bureaucracy, “The truth is that the government cannot give if it does not take from somebody.”

If business investors think it is a wise move to back the project on their own, then let the spring games begin. If not, then there is no reason for government leaders to assume they have better business sense when it comes to gambling with public funds. Regardless, officials in Columbus, Ohio can certainly raise no justification for asking taxpayers in Toledo and Dayton, much less New York and L.A., to help them build yet another sports facility.

Matthew Hisrich is a policy analyst with The Buckeye Institute for Public
Policy Solutions, an independent, nonprofit education and research
organization based in Columbus, Ohio.