Monday, April 05, 2010

NYT op-ed argues against skybox tax subsidies, (indirectly) undermines Forest City Ratner's plan for the Barclays Center

It's pitched mostly as a baseball piece, tied to the new season, but today's New York Times op-ed, Throw Out Skybox Tax Subsidies, could just as easily been written to explain how the new basketball arena in Brooklyn is being funded and marketed.

Richard Schmalbeck, a law professor at Duke, and Jay Soled, a professor at the Rutgers Business School, write:
UNTIL the 1970s, Major League Baseball was a populist sport. Bleacher seats cost as little as a dollar, meaning middle- or even working-class fans could afford to take their families to a game a few times each season.

But in the years since, tickets to baseball games — along with other professional sports events — have skyrocketed in cost. Over the last two decades, the average ticket price for a Chicago Cubs game has increased 265 percent, more than four times the inflation rate. Add in parking, concessions and souvenirs, and a family trip to one of this week’s opening day games could easily cost a few hundred dollars.

There are many reasons for the price explosion, but a critical factor has been the ability of businesses to write off tickets as entertainment expenses — essentially a huge, and wholly unnecessary, government subsidy.
That means that anyone who wants a good seat is in competition with businesspeople wielding deductions--and that ballparks are today designed with fewer seats but more luxury skyboxes.

For arenas, too

The same could be said about arenas. There are to be 104 suites at the Atlantic Yards arena, down from a once-projected 170. The team's interim home, the Prudential Center in Newark, has 82 suites, nearly three times as many as the 29 suites at the Izod Center.

In other words, by appealing more to big spenders, Forest City Ratner finds a way to build a new arena.

After all, why would this map (right) from the Barclays Center site point to Wall Street, "The Heart of World Commerce"?

Reform possible?

So, is any reform possible?

The authors note that, in 1986, Congress "restricted the deductibility of luxury skybox tickets to the face value of non-luxury premium tickets, like center-court seats at a basketball game or behind-the-plate seats at a baseball game"--a very limited victory, given the rising cost of premium tickets that are not part of suites or skyboxes.

The authors write:
Ideally, Congress would get rid of business-entertainment deductions altogether — after all, they are little more than an excuse for corporate executives to consume luxury items at a discount, distorting markets and cheating the public out of substantial tax revenue.
But they recognize that's unrealistic and instead suggested limiting deductions "to a low, fixed amount — say, $50 per seat, per game."

That would help baseball--and, I'd add, other sports--return to their roots.

And if it gets proposed, you can bet that Forest City Ratner, deploying the likes of lobbyist Al D'Amato, will find many routes to undermine it.

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