At EconLog, I often catalogue and criticize government measures that reduce our freedom and hurt our economy. So it’s nice when I can report on a recent vote that went the other way: a vote to reduce the role of government in our economy.
On Tuesday, April 2, voters in Jackson County, Missouri voted, by 58.1% to 41.% against extending the 3/8 percentage point sales tax that has existed for decades. According to Varad Raigonkar of Reason, extending the sales tax for 40 years would have raised about $2 billion in revenue over the next 40 years.
The money would have gone to renovate the Kansas City Royals’ baseball stadium and to build a new stadium for the recent Super Bowl winners, the Kansas City Chiefs.
In short, it would have distributed funds from people who pay the sales tax to pretty wealthy team owners. It’s possible, of course, that those funds would have caused prices of tickets to be lower than otherwise because now, without that tax, the two teams will need to raise money from willing payers, which might mean higher ticket prices. Even in that case, though, the funds would go to the relatively wealthy. A high percent of people who pay the current ticket prices are almost certainly relatively wealthy.
Thus the title of this post. A majority of the voters voted against redistributing wealth upward.
READER COMMENTS
Todd Ramsey
Apr 4 2024 at 10:10am
Everything you write is true.
However, I disagree with the implication that the only people who benefit from a sports team are the owners, players, and ticketholders. Thousands of residents of Kansas City, who may have never attended a game, get tremendous (although difficult to quantify) psychic income from the successes (and even failures) of their sports franchises. This fact is often overlooked in discussions of the economic impact of sports in a city.
Craig
Apr 4 2024 at 10:33am
Ok, fair enough and indeed I love my Yankees, but here’s the thing, they could just as well form a joint stock company and those fans could go onto their Robinhood apps and buy some stock in the team and then they could be co-owners for as little as $1 if they want to be, right?
johnson85
Apr 4 2024 at 10:45am
There’s nothing stopping those people receiving “psychic income” from voluntarily donating to pay for the stadium. That’s essentially what funds most of college baseball stadium costs and a big portion of football stadium costs.
BC
Apr 5 2024 at 4:35am
Todd is making an externality argument, i.e., that Kansas City residents benefit from the sports franchises even if they don’t pay to attend games. Sure, they could voluntarily donate or buy stock in the team, but the point is that they can get the “psychic” benefits whether they pay or not. The “psychic” benefits are non-excludable. It’s the same argument as that for taxpayer funding of basic science research or the arts. (Actually, the arts seem more excludable than sports. It’s hard to get the benefits of art and music without actually attending the museum or concert hall.)
Of course, the problem with this and almost every other externality argument is that, while one can often make a case that an externality — like “psychic” benefit — exists, it’s pretty hard to make a plausible argument that political processes can actually handle the purported externality in any sort of economically efficient manner. After all, policy makers deliver benefits to external parties (sports fans in this case) and impose costs on yet other external parties (sales taxpayers). Once government is involved, it’s *all* externalities. How does the amount one spends on sales taxable goods connect in any way to the “psychic” benefits that one receives from the local sports teams? (Or, from basic science or the arts for that matter.)
Jon Murphy
Apr 5 2024 at 7:18am
I don’t see how the externality is uncompensated. The team does indeed get paid for this psychic income via media franchise and broadcast rights.
BC
Apr 5 2024 at 8:05pm
I thought about the broadcast rights. Even if someone doesn’t watch many games on TV, and hence doesn’t contribute to the ratings that advertisers pay for, they could still psychically benefit from the buzz around the team. If someone watches just the playoff games, do the media rights for the playoff games compensate the team for all the psychic benefits? The fan could have still been following the team during the season. Conversations with friends does not require licensing, and I don’t think sports reporting does either?
I repeat the other point though, which is that if one can’t quantify this externality (nor quantify how much is captured by broadcast rights), then I don’t see how a sales tax, which isn’t even targeted towards sports fans, can be said to match the externality.
Jon Murphy
Apr 6 2024 at 8:15am
True but irrelevant. The team is still compensated.
BC
Apr 7 2024 at 4:25am
How is the team compensated for people not watching the games on TV? The lower ratings leads to lower licensing fees.
Marty L
Apr 4 2024 at 5:01pm
I read today the Chiefs are wanted in Dallas. I suspect if I lived in Jackson county, I would have voted no. The problem is what are the costs and benefits? I suspect the Chiefs generate a great deal of income in the area. That may go to some other city. I know of no better way to decide whether a community wants to pay a tax, than a vote of the citizens. But I would bet if the Chiefs move to another city, the transfer of wealth will not be the first concern.
dennis e miller
Apr 4 2024 at 8:10pm
If improving stadiums results in higher ticket prices, that would seem the best alternative because the cost is being paid by the people who benefit directly from stadium activities. Why should everyone have to pay a tax for something that a smaller group of people enjoy. Yeah, yeah, I know, we can say that the stadium generates income and jobs for support businesses. But that’s indirect. I think those interested should bear the costs of their special interest rather than the general public.
Craig
Apr 5 2024 at 7:45am
“Yeah, yeah, I know, we can say that the stadium generates income and jobs for support businesses. ”
It does, that which is seen, but consider…..
“[An army of][the sports venue] a hundred thousand men, costing the taxpayers a hundred million of money [the taxpayers paying the sales tax], live and bring to the purveyors as much as a hundred million [the cost of the stadium] can supply. That is which is seen.
But, a hundred million taken from the pockets of the taxpayers [the sales tax paid by taxpaers], ceases to maintain these taxpayers and their purveyors [to spend on things THEY want] as far as a hundred million reaches. This is that which is not seen. Now make your calculations. Add it all up, and tell me what profit there is for the masses?
-Frédéric Bastiat
Indeed staying in Atlanta for a while pre-pandemic I was stuck paying a 19-20% Fulton County tax (occupancy tax?) at a hotel amounting to hundreds of dollars. That money was used to help subsidize Mercedes Benz stadium and for sure there were people working on that stadium. But those hundreds of dollars were hundreds of dollars were now incapable of being spent on things I wanted, like frivolous things like raising my children. You know stupid things like that, right? 😉
Robert William Humphreys
Apr 5 2024 at 6:50am
Yes, this is a victory for taxpayers in KC and indicates that KC taxpayers may be somewhat smarter than taxpayers in many US cities that have allowed wealth to be transferred to yet another sports franchise and its wealthy ownership. A majority Americans watch neither NFL football nor the Super Bowl. Let those who do watch pay for a new stadium via ticket prices, wildly inflated prices for concessions, and ludicrous parking fees. If the Chiefs move to Dallas or some other venue with dumb taxpayers, then KC fans can move to there and pony up. They will feel right at home. Might this cost some KC jobs related to football? Probably, but we already know that the economic impact of pro sports is never positive when taxpayers are stuck with the cost of building and maintaining stadium facilities and associated infrastructure. And, we know that once that new stadium becomes old, taxpayers will be asked to do it all over again. It’s the gift that keeps on taking.
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