According to a new study from the centrist Brookings Institution, the federal government has lost $3.7 billion in revenue since 2000 due to local tax breaks given to build major sports stadiums and arenas.
Although the federal government doesn't directly subsidize stadium construction, it loses revenue when stadiums are financed with tax-exempt municipal bonds because the interest income that bond-buyers earn is tax-free at the federal level.
This effective federal subsidy seems fairly small: On average, it comes to just $27 for each income tax return filed in 2015. But this is a classic case of diffuse costs and concentrated benefits. The subsidy only helps the sports team, not the local community or the country.
"Indeed, there is little evidence that stadiums provide even local economic benefits," the study's authors write. "Decades of academic studies consistently find no discernible positive relationship between sports facilities and local economic development, income growth, or job creation."
Even if stadium subsidies did create local jobs, it's not clear why the federal government should be providing the subsidy instead of local governments. Many states don't have major professional sports teams, but they pay income taxes. "Residents of, say, Wyoming, Maine, or Alaska have nothing to gain from the Washington-area football team's decision to locate in Virginia, Maryland, or the District of Columbia," the authors write.
The biggest beneficiary of the subsidies is, by far, the New York Yankees. The federal government lost $492 million in revenue from income on tax-free bonds for building the new Yankee Stadium. The second-biggest beneficiaries are the New York Mets and the Indianapolis Colts, whose stadium projects each resulted in $214 billion in lost federal revenue.
Combined, New York is the biggest beneficiary, costing the federal government $867 million in revenue. Houston and Cincinnati come next, whose projects have each cost the feds less than half as much.
The study was authored by Ted Gayer, Austin Drukker and Alexander Gold, all with Brookings.
Jason Russell is a commentary writer for the Washington Examiner.