9 ms·

NFL claims $600M in Super Bowl economic impact. Economists say it's closer to $0

112 points by amitkumar01 13y ago

antonius 13y ago
What ticks me off and isn't mentioned in the article is how the U.S Government gave permission and classifies the NFL as a non-for-profit organization[1]. This classification deters millions in taxes that any other organization of its' size would ultimately be paying. [1] http://www.nbcnews.com/business/legal-procedure-critics-cry-foul-nfl-defends-nonprofit-status-8C11412804 http://www.nbcnews.com/business/legal-procedure-critics-cry-...
- amitkumar01 13y ago
  They do touch on it..."It would be higher still if not for the fact that the NFL's tax-exempt status allows its employees to avoid paying any local sales taxes for their dinners or hotel stays during Super Bowl week; in New Orleans, this amounted to $800,000 in lost sales tax revenue."
  - gamblor956 13y ago
    Sales tax exemptions for non-profits are state-level exemptions. States don't have to accord the NFL non-profit status for state taxes if they don't want to.
    - _delirium 13y ago
      I don't see the article arguing otherwise. The article is just arguing that states shouldn't be playing the NFL's bullshit game, not that it's the federal government's fault they are.
- maxerickson 13y ago
  I don't particularly care if the league keeps their non profit status or not, but they would pay taxes on recognized income, not revenue. This means that they could arrange to pay ~$0 tax by not having much income (which they probably more or less do now).
  - _delirium 13y ago
    As far as income taxes that's true. However the NFL's current nonprofit status means it avoids taxes that most other entities (individuals or businesses) would have to pay even if not profitable, such as sales tax. Many (most?) states allow nonprofits to show a tax-exempt ID number at places like Wal-Mart or at hotels, and have sales, occupancy, and other taxes removed. The motivation, I believe, was to provide in effect a subsidy to the work of organizations like the Red Cross, by reducing their expenses. That can be solved at the state level, however. The states do not have to defer to the federal government's classification of 501(c) tax-exempt organizations when choosing who to exempt from state taxes. They could adopt a more stringent state-level definition. Or they could still defer to the federal categories, but a more restrictive subset. For example, a state could limit tax exemptions to 501(c)(3) charities (which have more stringent requirements), and not exempt 501(c)(6) organizations like the NFL. (Considering what kind of stuff slips into 501(c)(6), this is probably a good idea beyond just the NFL case.)
    - maratd 13y ago
      > Many (most?) states allow nonprofits to show a tax-exempt ID number at places like Wal-Mart or at hotels, and have sales, occupancy, and other taxes removed. They also allow any business to do the same, as long as whatever is purchased is sold to another party as a part of doing business. So a computer tech shop, for example, would never pay for any parts it purchases at the store that are then included in a system it sells.
      - _delirium 13y ago
        Under a VAT system, that's true across the board. But under the U.S. sales-tax system nonprofits have blanket exemption, while businesses generally don't. Services such as hotels used in business travel, for example, are generally not exempt, so the NFL would pay occupancy tax if it were not a 501(c)(6) organization (or a state chose not to recognize that exemption). And whether purchase of goods is exempt depends on the state and the specific kind of good; most provide very specific lists of exempted "machinery and equipment" that fall far short of everything. For example, here are California's rules: http://www.boe.ca.gov/sutax/faq426.htm#1 http://www.boe.ca.gov/sutax/faq426.htm#1
- ozi 13y ago
  Why does this tick you off? "Non-profit" doesn't mean it has to be a charity. It just means that they make no profit... All profits are divided among the teams and taxed accordingly. The money is being taxed, just not at the "top" level.
  - lukeschlather 13y ago
    Non-profit also doesn't mean it has to be tax-exempt. The NFL doesn't smell to me like something that should have tax-exempt status.
    - tuxracer 13y ago
      Tax-exempt status or not only profits are taxed anyways. As ozi mentioned they send their profits to the individual teams (where it is then taxed).
      - _delirium 13y ago
        No, they avoid may other taxes via this strategy as well, such as sales taxes and hotel-occupancy taxes.
        honksillet 13y ago
        It's not like our government wouldn't horribly squander any additional tax receipts.
  - yeukhon 13y ago
    Look at this: http://www.change.org/NFLnonprofit http://www.change.org/NFLnonprofit
  - 001sky 13y ago
    It just means that they make no profit LOL. They make plenty, they just funnel cash to affiliates via the cost structure. Having a non-profit status enables this shell game by eliminating economic entropy. Its 2013...this is not "news", its is standard operating procedures in many walks of life. Have you seen the television contracts for the NCAA? Oh, wait...those are just a bunch of amateurs =D The players, maybe. But not the accountants, coaches, boosters, and administrators.
- tsotha 13y ago
  Meh. The NFL is a nonprofit organization. I don't see the problem. The teams pay plenty of taxes.
- dlp211 13y ago
  This comes up all the time on reddit. The NFL makes no profit. Do not confuse the statement of the "NFL makes no profit" with "the collection of teams that make up the NFL make no profit". They are not the same thing. The NFL is paid by the teams to work for them negotiating with the NFLPA, TV contracts, etc. NFL employees are not tax exempt, and neither are the teams.
- mdmarra 13y ago
  The NFL is an entity which represents the interests of the teams' owners. The commissioner is appointed by the owners. It bargains collectively against the Player's Union and handles things like national television deals, officiating, and scheduling. The teams themselves are where almost all of the money is. Each one operates like an independent entity that has to follow rules set forth by the NFL. This is why they're called "franchises." The NFL does gross millions of dollars each year, but it's a tiny fraction compared to each individual team and the teams themselves do not enjoy the same tax status that the league itself has.
- frogpelt 13y ago
  IKEA has a similar set up in the Netherlands. http://en.wikipedia.org/wiki/IKEA#Profits http://en.wikipedia.org/wiki/IKEA#Profits
VLM 13y ago
This is a strangely bottom up analysis. If a long chain of assumptions and wild guesses results in $35M sales tax revenue, it should be pretty easy to compare this weeks sales tax revenue to 52 weeks ago and subtract and see how it compares. As a meta issue its a "belief system" so there's no point dragging math and logic into it. Exactly like debating evolution or other topics. Comically, we got stuck with a new stadium because it was claimed if the local ball team pouted and left, all of us mere consumers would react by making huge piles of paper cash money in our backyards, and then light the piles of cash on fire. A complete lack of reasoning is BAU WRT sports economics. As a startup issue you see pretty much the same style and type of arguments about the contribution of startups to the local economy.
- tsotha 13y ago
  When I lived in Southern California the NFL and its boosters were continually trying to get the taxpayers to build a stadium complex. The arguments always went something like "There will be X new tax revenue and Y new jobs." And that's probably true. But if you took the same land and used the same money to build a big shopping mall your X and Y would both be much bigger. Every time local governments did a study that compared a new stadium to just about any other use of the land the alternative was better. I'm not opposed to stadiums, per se, but professional sports teams are businesses and as such need to pay their own expenses.
  - TwoBit 13y ago
    I feel like the reason cities court sports teams to their possible economic detriment is due to the selfishness of the city leaders. Who wouldn't want to be mayor of a city with the Super Bowl?
    - jamesbritt 13y ago
      Such as the mayor of East Rutherford? He seems to have gotten bypassed.
      - 13y ago
Stratoscope 13y ago
In the last few days I've received a couple of emails from FedEx with the message below. No doubt other carriers have been sending similar alerts. I don't know, of course, but I have a strong hunch that none of the costs associated with this message (businesses unable to receive their deliveries, carriers having to make contingency plans and add extra staff to catch up after the "festivities", customers having to work around shipping restrictions and delays, etc.) have been accounted for in NFL's economic analysis. After a great storm comes through, there are plenty of estimates of the economic damage it causes. Of course the Super Bowl has benefits that a storm lacks, but I have to wonder if the negative externalities are properly accounted for, or if they just tally the benefits. FedEx message follows... Operations During Super Bowl XLVIII FedEx will be operating in the metro New York / New Jersey area during SuperBowl XLVIII festivities through February 5, 2014. Some customers in the metro New York / New Jersey area may experience service delays or disruptions during this time because of government security measures in place for Super Bowl XLVIII. We encourage all customers shipping into the area to check with your recipients to understand their locations relative to the security zones. We encourage metro New York / New Jersey area customers to track packages on fedex.com or by calling 1-800-GO-FEDEX. Our customer service teams can assist you in locating an alternate delivery location as needed. We have implemented contingency plans and our teams will minimize delays to the extent possible. Please continue to check FedEx Service Alerts for details. Shipping to affected areas? To help avoid delays, we encourage you to contact your recipients to verify whether their location is open or able to receive deliveries before and after Super Bowl XLVIII. Note that potential service disruptions may not affect FedEx Express, FedEx Ground, FedEx Freight, FedEx Office, etc. the same. This may result in different levels of impact as well as cities, states and ZIP Codes serviced. Continue to check fedex.com for service updates. For specific shipment status information, please track your shipment at fedex.com. You can also contact FedEx Customer Service at 1.800.GoFedEx 1.800.463.3339 or stay up to date by subscribing to FedEx Service Alert email notifications at the FedEx Email Subscription Center. Consistent with the provisions of the FedEx Service Guide, shipments delayed due to Super Bowl XLVIII are not eligible for a refund or credit under the money-back guarantee policy.
honksillet 13y ago
The truth is somewhere in between
- tomByrer 13y ago
  ^ logical fallacy https://yourlogicalfallacyis.com/middle-ground https://yourlogicalfallacyis.com/middle-ground
  - zorbo 13y ago
    ^ Logical fallacy fallacy http://www.fallacyfiles.org/fallfall.html http://www.fallacyfiles.org/fallfall.html The beauty of logical fallacies is that you can use them to discredit anything you want. "Scientists are in agreement".. Appeal to authority! But that's not how logical fallacies work. You still need to provide a logically sound reasoning why the fallacy applies. Which you didn't.
    - ucho 13y ago
      He probably thought it is obvious. If it is so hard to estimate economic impact it might as well be over 600M or under 0.
      - Zarathust 13y ago
        This year, I bought a box of chicken wings for 10$ so I made his argument true
UweSchmidt 13y ago
How about it's a zero-sum game: Entertainment money could be spent elsewhere. Actual economic impact is building a better tool or bringing in the harvest. Paying this or that entertainer to do their thing is meaningless. (The Gross Domestic Product and other economic figures do not account for this and treats each economic transaction as equal. Additionally the knee injury hospital bill of the young player who never made it to the NFL also increases the GDP, adding to the confusion what "economic impact" is.)
- massysett 13y ago
  Entertainment is essential; through the ages societies have allocated economic resources to entertainment in various forms. That's what the Romans did in the Colosseum. Without entertainment to unwind, people are less happy and they just might riot rather than bring in the harvest. So entertainment is just as essential as building a better tool. Entertainment like anything in the economy benefits from greater efficiency, and modern economies deliver great value for the resources they spend on entertainment. There is cheap plentiful music everywhere, and lots of quick video available. Pro sports also provide quite efficient entertainment, as people spend tons of time not only watching the events but also tracking them and talking about them. It gives people a lot of enjoyment.
- mathattack 13y ago
  I concur that it's largely a zero-sum game, but it still can make local sense. New York can see economic activity that another city might not.
seizethecheese 13y ago
How about a negative economic impact? The event itself creates distortions that many unsophisticated merchants are not able to predict. I work at a restaurant, and the owner almost certainly lost thousands of dollars today due to very little demand. (We were severely overstaffed and also had to throw some food away. We weren't open last year so predicting this was non-trivial.)
massysett 13y ago
The "tourist displacement" argument makes no sense. The hotel market in any large city depends in part on having large events come to town: conventions, marathons, Super Bowls. Such events help drive the construction of multiple large hotels. Without the large events, there would be fewer hotel rooms in the first place and, thus, fewer potential tourists to displace--no tourists ever materialize without hotel rooms. With the large events, some tourists might be displaced for abnormally large events (and in NYC or in most Super Bowl host cities, the Super Bowl is not going to be abnormally large.) But even if this displacement happens, the tourists benefit during all other times because there are more hotel rooms for them--which lifts numerous other businesses in the city, such as restaurants and shops and entertainment venues.

112 points by amitkumar01 13y ago

What ticks me off and isn't mentioned in the article is how the U.S Government gave permission and classifies the NFL as a non-for-profit organization[1]. This classification deters millions in taxes that any other organization of its' size would ultimately be paying. [1] http://www.nbcnews.com/business/legal-procedure-critics-cry-foul-nfl-defends-nonprofit-status-8C11412804 http://www.nbcnews.com/business/legal-procedure-critics-cry-...

amitkumar01 13y ago
They do touch on it..."It would be higher still if not for the fact that the NFL's tax-exempt status allows its employees to avoid paying any local sales taxes for their dinners or hotel stays during Super Bowl week; in New Orleans, this amounted to $800,000 in lost sales tax revenue."
- gamblor956 13y ago
  Sales tax exemptions for non-profits are state-level exemptions. States don't have to accord the NFL non-profit status for state taxes if they don't want to.
  - _delirium 13y ago
    I don't see the article arguing otherwise. The article is just arguing that states shouldn't be playing the NFL's bullshit game, not that it's the federal government's fault they are.
maxerickson 13y ago
I don't particularly care if the league keeps their non profit status or not, but they would pay taxes on recognized income, not revenue. This means that they could arrange to pay ~$0 tax by not having much income (which they probably more or less do now).
- _delirium 13y ago
  As far as income taxes that's true. However the NFL's current nonprofit status means it avoids taxes that most other entities (individuals or businesses) would have to pay even if not profitable, such as sales tax. Many (most?) states allow nonprofits to show a tax-exempt ID number at places like Wal-Mart or at hotels, and have sales, occupancy, and other taxes removed. The motivation, I believe, was to provide in effect a subsidy to the work of organizations like the Red Cross, by reducing their expenses. That can be solved at the state level, however. The states do not have to defer to the federal government's classification of 501(c) tax-exempt organizations when choosing who to exempt from state taxes. They could adopt a more stringent state-level definition. Or they could still defer to the federal categories, but a more restrictive subset. For example, a state could limit tax exemptions to 501(c)(3) charities (which have more stringent requirements), and not exempt 501(c)(6) organizations like the NFL. (Considering what kind of stuff slips into 501(c)(6), this is probably a good idea beyond just the NFL case.)
  - maratd 13y ago
    > Many (most?) states allow nonprofits to show a tax-exempt ID number at places like Wal-Mart or at hotels, and have sales, occupancy, and other taxes removed. They also allow any business to do the same, as long as whatever is purchased is sold to another party as a part of doing business. So a computer tech shop, for example, would never pay for any parts it purchases at the store that are then included in a system it sells.
    - _delirium 13y ago
      Under a VAT system, that's true across the board. But under the U.S. sales-tax system nonprofits have blanket exemption, while businesses generally don't. Services such as hotels used in business travel, for example, are generally not exempt, so the NFL would pay occupancy tax if it were not a 501(c)(6) organization (or a state chose not to recognize that exemption). And whether purchase of goods is exempt depends on the state and the specific kind of good; most provide very specific lists of exempted "machinery and equipment" that fall far short of everything. For example, here are California's rules: http://www.boe.ca.gov/sutax/faq426.htm#1 http://www.boe.ca.gov/sutax/faq426.htm#1
ozi 13y ago
Why does this tick you off? "Non-profit" doesn't mean it has to be a charity. It just means that they make no profit... All profits are divided among the teams and taxed accordingly. The money is being taxed, just not at the "top" level.
- lukeschlather 13y ago
  Non-profit also doesn't mean it has to be tax-exempt. The NFL doesn't smell to me like something that should have tax-exempt status.
  - tuxracer 13y ago
    Tax-exempt status or not only profits are taxed anyways. As ozi mentioned they send their profits to the individual teams (where it is then taxed).
    - _delirium 13y ago
      No, they avoid may other taxes via this strategy as well, such as sales taxes and hotel-occupancy taxes.
      - honksillet 13y ago
        It's not like our government wouldn't horribly squander any additional tax receipts.
- yeukhon 13y ago
  Look at this: http://www.change.org/NFLnonprofit http://www.change.org/NFLnonprofit
- 001sky 13y ago
  It just means that they make no profit LOL. They make plenty, they just funnel cash to affiliates via the cost structure. Having a non-profit status enables this shell game by eliminating economic entropy. Its 2013...this is not "news", its is standard operating procedures in many walks of life. Have you seen the television contracts for the NCAA? Oh, wait...those are just a bunch of amateurs =D The players, maybe. But not the accountants, coaches, boosters, and administrators.
tsotha 13y ago
Meh. The NFL is a nonprofit organization. I don't see the problem. The teams pay plenty of taxes.
dlp211 13y ago
This comes up all the time on reddit. The NFL makes no profit. Do not confuse the statement of the "NFL makes no profit" with "the collection of teams that make up the NFL make no profit". They are not the same thing. The NFL is paid by the teams to work for them negotiating with the NFLPA, TV contracts, etc. NFL employees are not tax exempt, and neither are the teams.
mdmarra 13y ago
The NFL is an entity which represents the interests of the teams' owners. The commissioner is appointed by the owners. It bargains collectively against the Player's Union and handles things like national television deals, officiating, and scheduling. The teams themselves are where almost all of the money is. Each one operates like an independent entity that has to follow rules set forth by the NFL. This is why they're called "franchises." The NFL does gross millions of dollars each year, but it's a tiny fraction compared to each individual team and the teams themselves do not enjoy the same tax status that the league itself has.
frogpelt 13y ago
IKEA has a similar set up in the Netherlands. http://en.wikipedia.org/wiki/IKEA#Profits http://en.wikipedia.org/wiki/IKEA#Profits

VLM 13y ago

This is a strangely bottom up analysis. If a long chain of assumptions and wild guesses results in $35M sales tax revenue, it should be pretty easy to compare this weeks sales tax revenue to 52 weeks ago and subtract and see how it compares. As a meta issue its a "belief system" so there's no point dragging math and logic into it. Exactly like debating evolution or other topics. Comically, we got stuck with a new stadium because it was claimed if the local ball team pouted and left, all of us mere consumers would react by making huge piles of paper cash money in our backyards, and then light the piles of cash on fire. A complete lack of reasoning is BAU WRT sports economics. As a startup issue you see pretty much the same style and type of arguments about the contribution of startups to the local economy.

tsotha 13y ago
When I lived in Southern California the NFL and its boosters were continually trying to get the taxpayers to build a stadium complex. The arguments always went something like "There will be X new tax revenue and Y new jobs." And that's probably true. But if you took the same land and used the same money to build a big shopping mall your X and Y would both be much bigger. Every time local governments did a study that compared a new stadium to just about any other use of the land the alternative was better. I'm not opposed to stadiums, per se, but professional sports teams are businesses and as such need to pay their own expenses.
- TwoBit 13y ago
  I feel like the reason cities court sports teams to their possible economic detriment is due to the selfishness of the city leaders. Who wouldn't want to be mayor of a city with the Super Bowl?
  - jamesbritt 13y ago
    Such as the mayor of East Rutherford? He seems to have gotten bypassed.
    - 13y ago

Stratoscope 13y ago

In the last few days I've received a couple of emails from FedEx with the message below. No doubt other carriers have been sending similar alerts. I don't know, of course, but I have a strong hunch that none of the costs associated with this message (businesses unable to receive their deliveries, carriers having to make contingency plans and add extra staff to catch up after the "festivities", customers having to work around shipping restrictions and delays, etc.) have been accounted for in NFL's economic analysis. After a great storm comes through, there are plenty of estimates of the economic damage it causes. Of course the Super Bowl has benefits that a storm lacks, but I have to wonder if the negative externalities are properly accounted for, or if they just tally the benefits. FedEx message follows... Operations During Super Bowl XLVIII FedEx will be operating in the metro New York / New Jersey area during SuperBowl XLVIII festivities through February 5, 2014. Some customers in the metro New York / New Jersey area may experience service delays or disruptions during this time because of government security measures in place for Super Bowl XLVIII. We encourage all customers shipping into the area to check with your recipients to understand their locations relative to the security zones. We encourage metro New York / New Jersey area customers to track packages on fedex.com or by calling 1-800-GO-FEDEX. Our customer service teams can assist you in locating an alternate delivery location as needed. We have implemented contingency plans and our teams will minimize delays to the extent possible. Please continue to check FedEx Service Alerts for details. Shipping to affected areas? To help avoid delays, we encourage you to contact your recipients to verify whether their location is open or able to receive deliveries before and after Super Bowl XLVIII. Note that potential service disruptions may not affect FedEx Express, FedEx Ground, FedEx Freight, FedEx Office, etc. the same. This may result in different levels of impact as well as cities, states and ZIP Codes serviced. Continue to check fedex.com for service updates. For specific shipment status information, please track your shipment at fedex.com. You can also contact FedEx Customer Service at 1.800.GoFedEx 1.800.463.3339 or stay up to date by subscribing to FedEx Service Alert email notifications at the FedEx Email Subscription Center. Consistent with the provisions of the FedEx Service Guide, shipments delayed due to Super Bowl XLVIII are not eligible for a refund or credit under the money-back guarantee policy.

honksillet 13y ago

The truth is somewhere in between

tomByrer 13y ago
^ logical fallacy https://yourlogicalfallacyis.com/middle-ground https://yourlogicalfallacyis.com/middle-ground
- zorbo 13y ago
  ^ Logical fallacy fallacy http://www.fallacyfiles.org/fallfall.html http://www.fallacyfiles.org/fallfall.html The beauty of logical fallacies is that you can use them to discredit anything you want. "Scientists are in agreement".. Appeal to authority! But that's not how logical fallacies work. You still need to provide a logically sound reasoning why the fallacy applies. Which you didn't.
  - ucho 13y ago
    He probably thought it is obvious. If it is so hard to estimate economic impact it might as well be over 600M or under 0.
    - Zarathust 13y ago
      This year, I bought a box of chicken wings for 10$ so I made his argument true

UweSchmidt 13y ago

How about it's a zero-sum game: Entertainment money could be spent elsewhere. Actual economic impact is building a better tool or bringing in the harvest. Paying this or that entertainer to do their thing is meaningless. (The Gross Domestic Product and other economic figures do not account for this and treats each economic transaction as equal. Additionally the knee injury hospital bill of the young player who never made it to the NFL also increases the GDP, adding to the confusion what "economic impact" is.)

massysett 13y ago
Entertainment is essential; through the ages societies have allocated economic resources to entertainment in various forms. That's what the Romans did in the Colosseum. Without entertainment to unwind, people are less happy and they just might riot rather than bring in the harvest. So entertainment is just as essential as building a better tool. Entertainment like anything in the economy benefits from greater efficiency, and modern economies deliver great value for the resources they spend on entertainment. There is cheap plentiful music everywhere, and lots of quick video available. Pro sports also provide quite efficient entertainment, as people spend tons of time not only watching the events but also tracking them and talking about them. It gives people a lot of enjoyment.
mathattack 13y ago
I concur that it's largely a zero-sum game, but it still can make local sense. New York can see economic activity that another city might not.

seizethecheese 13y ago

How about a negative economic impact? The event itself creates distortions that many unsophisticated merchants are not able to predict. I work at a restaurant, and the owner almost certainly lost thousands of dollars today due to very little demand. (We were severely overstaffed and also had to throw some food away. We weren't open last year so predicting this was non-trivial.)

massysett 13y ago

The "tourist displacement" argument makes no sense. The hotel market in any large city depends in part on having large events come to town: conventions, marathons, Super Bowls. Such events help drive the construction of multiple large hotels. Without the large events, there would be fewer hotel rooms in the first place and, thus, fewer potential tourists to displace--no tourists ever materialize without hotel rooms. With the large events, some tourists might be displaced for abnormally large events (and in NYC or in most Super Bowl host cities, the Super Bowl is not going to be abnormally large.) But even if this displacement happens, the tourists benefit during all other times because there are more hotel rooms for them--which lifts numerous other businesses in the city, such as restaurants and shops and entertainment venues.