Editorial: Reject NASCAR tax break
This past week, an Iowa Senate subcommittee approved a plan to give the Iowa Speedway, a motor racing track in Newton that was recently purchased by NASCAR, a $9 million tax break. The motion will proceed to the Iowa Senate Ways and Means Committee, and Iowa Senate Majority Leader Michael Gronstal, D-Council Bluffs, expects the bill to pass in the full Senate.
We believe that this move is yet another example of the broken culture of sports welfare that has stricken local communities across the nation.
The basic premise of sports welfare is that if you either give massive tax breaks to massive sports organizations such as NASCAR or simply appropriate public funds to construct and maintain complexes for these organizations, the local community will reap the benefits from fans staying in nearby hotels, shopping at local establishments, and the jobs provided by complex.
However, the evidence suggests that, rather than bolstering the local economy, sports welfare actually has a very detrimental impact on local communities.
Victor Matheson, an economist specializing in sports welfare, has argued that because sporting events are not an everyday occurrence, many sports complexes spend most of the year unused. This leads to complexes that sit around, unoccupied, simply draining public funds from the municipal government.
University of Maryland-Baltimore County economics Professor Dennis Coates has even contended that sports welfare actually lowers the incomes of local inhabitants, because most of the money generated by the stadium ends up going to the owners. As a Coates study put it, “The professional sports environment in the 37 metropolitan areas in our sample had no measurable impact on the growth rate of real per capita income in those areas. The professional sports environment has a statistically significant impact on the level of real per income in our sample of metropolitan areas, and the overall impact is negative.”
This has happened in city after city year after year. In Cincinnati, Hamilton County amassed $1 billion in debt by funding the construction of Paul Brown Stadium for the Cincinnati Bengals. In order to pay for this, the city cut spending in areas such as public education.
While the Newton, Iowa, tax break is, fortunately, not nearly as disastrous as Hamilton County’s experiment in sports welfare, the $9 million taken out of the state’s coffers are still $9 million not being spent improving the state’s infrastructure, schools, police, firefighters, health care, and other public services that badly need funding.
Besides, it’s not as if NASCAR actually needs the $9 million tax break from the state. NASCAR generates around $3 billion in revenue annually. Paying $9 million for the right to own property in central Iowa will not bankrupt the second-largest professional sports franchise in the United States.
And, fundamentally, the state of Iowa deserves the tax money from NASCAR. The state is providing NASCAR with an opportunity to generate obscene amounts of profit. In return, it’s only fair that NASCAR hand over some revenue in the form of taxation to the people responsible for the company’s success, the people of Iowa.
We feel that there is no reasonable economic or political justification for robbing the state’s tax base of $9 million for an enterprise that, at best, will have a neutral economic impact on the local community. We urge the Iowa Senate to reject this deleterious exercise in sports welfare.
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