Taxing the Business of Sports

Abstract

“The rising value of American professional franchises, together with league expansions and more sale transactions, has caused the Internal Revenue Service to take interest.”

Major professional sports in America, according to several estimates, is a $225 billion industry. While fan interest may wax and wane as athletes and organizations are beset by scandal and, even worse, mediocrity, the enterprise of sports continues to thrive and to occupy a disproportionate share of the public consciousness. Sports leagues today are immensely profitable businesses – more interested, perhaps, in the bottom line than the box score. Yet, somewhat anomalously, the purveyors of sport claim to be providing a public service – to the fans and to the communities in which they play. Sports leagues and franchises routinely assert that they, more so than most private enterprise, are entitled to a sizable share of the public fisc to finance their expansion. State and local governments have responded in unprecedented ways; during the 1990s alone, taxpayers shelled out approximately $11 billion to fund new sports facilities for the owners of major American sports franchises.