NFL Tax Breaks
The National Football League (NFL) is the most profitable league in the world. One reason for its success is the tax breaks given to it by local, state, and federal governments.
The majority of teams are owned by billionaires who take advantage of these NFL tax breaks. As a result, their bottom lines get impacted positively. At first, tax breaks are thought of as capital received for a team relocating to a new city or public funding needed to build a stadium, which is what the majority of taxpayers’ money is used for. But when digging deeper into the NFL and looking at taxes, there are tax loopholes offered to teams and the league.
The focus of this article will be how taxes are accessed by the government and what subsidies are given to the league. Further down, we assess whether or not there will be changes in the future. But before getting into the nitty-gritty of the tax credit and breaks, let’s take a look at how much money the NFL makes.
In 2016, revenue hit a record high of approximately $13.0 billion, an increase of over $900.0 million compared to the previous year. From the period of 2006 to 2016, the total revenue accounted for has doubled, with no negative growth years being accounted for. (Source: “Total revenue of all National Football League teams from 2001 to 2016 (in billion U.S. dollars)*,” Statista, last accessed October 10, 2017.)
How Much Tax Money Goes to the NFL?
On opening weekend in 2015, there were 16 stadiums being used, which have nearly $3.0 billion in taxpayer’s money. This is money that could be used to benefit the public or the economy. Rather, the public is funding a business that is growing year after year. Over the past couple of decades, this amounts to more than $7.0 billion of public taxpayer money.
The NFL pays virtually no taxes because revenue is passed along to the teams, which end up paying the taxes. In some cases, an NFL team would not even need to pay taxes to the government. For instance, the Dallas Cowboys, known as “America’s Team,” pays nearly nothing in taxes. This is due to them being based in Texas, which has no state taxes. Therefore, money never has to be returned to the government for taking taxpayer dollars. (Source: “Op-Ed: NFL Teams Score $7 Billion in Taxpayer Subsidies on Stadiums,” Watchdog.org, September 16, 2015.)
NFL Tax Breaks for Players
So, how much do NFL players save in taxes? Players of the teams receive between 47% to 48.5% of all revenue generated from the league. The rest goes to the owners and the league. The players themselves could pay a tax rate of up to 50% of income earned. The tax rate depends on what city they play for and where they play the visitors games. This is because every state will charge a different rate on taxable income. NFL agents normally structure deals that would defer payments, which results in millions of dollars in savings for players. (Source: “What Do NFL Players Pay in Taxes?,” SmartAsset, January 23, 2017.)
NFL Tax Subsidies
The largest cost for any team is the cost related to the stadium. When a team is looking to raise capital for an investment, there is one tax-free product that is used: tax-free municipal bonds. Typically, tax-free municipal bonds are used for public use projects such as bridges, water systems, roads, and other infrastructure needed for the public.
The reason why these bonds are allowed by the local and state government is the belief that there will be an economic benefit for the city and state over the long term. Therefore, governments are willing to give up present tax revenue for a longer-term steady stream of income.
The stadium would be the most obvious tax break given to NFL teams, but there are also hidden benefits given to teams. Cities often give a discount to teams for city services, which include water cost, electricity, and police patrolling on game day. Teams also see a relief on property taxes that would otherwise be due. What makes things very interesting about the NFL and taxes is that their tax-exemption status was given up voluntarily in 2015.
NFL Tax-Exempt Status
Looking into the move of giving up the tax-exemption status was made more due to a long-term strategic plan over profiting in the near term. This meant that the NFL was labeled as a charity in the eyes of the government. How is this possible when there are advertisers lined up to become an official sponsor or when their tickets are priced so high?
The move shows that the NFL was willing to give up the tax exemption because it seems that it was a distraction for the public and politicians. It shows that the NFL gave up the tax breaks that would be seen and known by the public while maintaining the rest of the credits and tax breaks given to the league. By giving up its not-for-profit structure there would be roughly $10.0 million that would be owed in taxes, which is just a drop in the bucket in its revenue. This, at the end of day, results in more money in the leagues’ pockets and less in the governments. (Source: “By dropping tax-exempt status, NFL can avoid disclosing Roger Goodell’s salary,” USA Today, April 28, 2015.)
There are billions of dollars that are saved in taxes, the revenue amounts to $13.0 billion annually, which is pretty much tax-free. There is even more saved with the savings in utilities and property tax money, which is very difficult to calculate but would amount to billions. With Trump now the president and players kneeling for the anthem, there could be change coming in the near future.
NFL Tax & Trump
Trump has found it very disrespectful that players of the league are not standing for the anthem. Judging by Trump’s tweet, it means more changes are coming to the NFL regarding its tax benefits.
Why is the NFL getting massive tax breaks while at the same time disrespecting our Anthem, Flag and Country? Change tax law!
— Donald J. Trump (@realDonaldTrump) October 10, 2017
With these possible changes coming in the future, it is quite possible that the NFL could lose its position as being the most profitable league in the world.