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Taxes and Touchdowns

Leveling the Playing Field in College Athletics

As almost a matter of course, federal and state governments now tax commodities that are broadly deemed “sins.” Tobacco products and alcoholic beverages fall under this heading. The rationale, other than elected officials always grubbing for money, is that consumption of these items imposes, in economics jargon, “negative externalities”; that is, it affects people not party to the transaction and/or imposes costs on society as a whole.
With regard to cigarettes, apart from second-hand smoke concerns and litter, inhaling leads to lung cancer and other diseases and thus the smoker may make disproportionate use of our health-care resources. (That the smoker pays steep cigarette taxes during his or her lifetime, then tends to die around age 65 without collecting much in the way of Social Security benefits, probably means that smokers are actually paying their own way through life—and death.)
Taxes on alcohol are similar. They are levied to produce revenues that offset domestic violence and help defray the costs of alcohol-related traffic accidents. (There is ample evidence that these taxes are generally set too low to “internalize the externality”—maybe because more politicians drink than smoke?—and thus should be raised.)
Currently gasoline taxes are the third sin item. Because automobile traffic causes air pollution, contributes to congestion and creates accidents, levies on gasoline serve the same purposes as with tobacco or alcohol. The fourth sin category—fat or sugar—involves our concerns about obesity and has led some officials and jurisdictions to try to tax fast-food and sugary soft drinks. (That those who are obese have to wear XXL clothing is not an externality; and the jury is still out whether the heavyset are like smokers and offset part of their societal costs by dying young.)
If these four sin taxes now on the table are acceptable, let me suggest a fifth item: college football games. Yes, I am advocating that we impose steep taxes on all intercollegiate football advertising, television broadcasts, logo merchandise sales, and gate receipts.

About 100 universities will field football teams at the Division I level this year; they will play 12 or more games each, plus from December 2011 through mid January 2012, 70 of these programs will also play in bowl contests. These games generate hundreds of millions of dollars—for the networks, coaches, athletic departments and institutions—but virtually nothing for the young men on the field (except for room, board, tuition, a walking-around allowance, and a souvenir t-shirt or cap; and because institutions and the NCAA have gone out of their way to label these players, largely African-American youths from inner-city neighborhoods and modest family circumstances, “student-athletes” not employees, if injured they are not eligible for workman’s compensation and other legal redresses).
Only a small fraction of these thousands of college football players will ever earn a living in the NFL, and less than half of them, in spite of being steered to meaningless “gut” majors and wink-wink instructors, will ever earn a degree from the universities they represent on Saturdays.
Although these athletes are amateurs only under the most twisted definition of the word, some fans, college peers, and the general public may arguably have some qualms about paying them salaries. (I do not have any such qualms.) Why that is remains somewhat of a mystery because few seem to object to paying run-of-the-mill coaches $2 million a year in base salary plus generous perks.
Let’s impose a sin tax on the revenues intercollegiate football and basketball generate for everyone but the players. This money could be set aside to provide funding for the ex-players to return to earn a degree, enter a graduate program, and/or start a small business.
Fans and universities benefit enormously from this exploitation. It is no stretch to treat this as in the same category as smoking, drinking, gorging ourselves on hot dogs and nachos, most of which we do in the stands or our family rooms while these exploited workers toil for our entertainment and the coach’s yacht. As citizens we should be above having our entertainment whims sated on the backs of these youngsters. Will it put an end to the cesspools at Ohio State, Oregon, Miami, USC, Auburn, LSU and ...?  No, but it’s time to draw a halt to the current arrangements. And for economists, raising the price is generally a good place to start.

Published: October 01, 2011
Issue: November 2011 Issue


Sandetrson's``sin tax'' on college football
I love Allen's ``sin tax'' proposal, particularly since I never realized such taxes on cigarettes and booze help pay for the users' illnesses, car wrecks, etc. I always assumed sin taxes were implemented to make costs so high that sinners, at least frugal ones on the fence, repented and stopped their vices. (Or at least quit driving so much.) But if the football public can't stomach paying college worker-athletes--the term ``student-athlete'' was invented by the NCAA for double-speak purposes--then a stiff tax on all the revenue churn is a great idea. It's crazy that players don't get workman's comp for, say, a knee replacement directly attributable to injury in a college bowl game. That the players aren't paid straight up, like every other American worker in the market place, is the craziest thing of all. Long live ``amateurism''!
Rick Telander, Oct-06-2011
I agree
I would prefer to stop the problem at the source. Let's stop making it a crime to pay players a market price. I am suspicious of how well programs described here will/could be run. Wait, that was an understatement. These programs will be run for the benefit of the newly created bureaucracy. Period.
Scott H., Oct-04-2011
Origin of Amateurism in Sports
Amateurism in sports started when British nobles in the 19th century did not want to be embarrassed by losing to commoners. It was used as a poor excuse in sports then, and it is used as a poor excuse in sports now.
Taylor J, Oct-04-2011
Another idea?
I would pay the sin tax on college sports much like I pay the sin tax on my soda and candy bars here in the state of Washington. And I have no problem with athletes earning a small stipend. Heck as grad students we were university employees who taught classes or did research and were rewarded with a small check -- why shouldn't our athletes be treated similarly for the entertainment services they provide? And yes they could use said stipends to purchase their own tattoos legally. I've also toyed with the idea that certain star athletes whose jerseys generate excessive revenues for the university should get a cut. As an incentive, I'd tie it to graduation. "Mr. Robinson, Here's your degree + your check for royalties. Thanks! Sincerely, the University of Michigan."
K. Cullen, Oct-04-2011
Muddy the waters...
1) there are fewer and fewer people who have a problem with paying college players. However, I have yet to find anyone who would tell me how it could be done. It's impossible to do directly through the school without repealing Title IX. If/when Title IX gets repealed, I'm still not sure it's good for the players overall--superstar players would doubtlessly earn a lot. Right now, 85 players get scholarships. If player benefits came from one budget pool, you can bet those scholarships would go away. Athletic Directors would need more money to pay top players. You now have probably about half as many young men going to college (and, frankly, most of them weren't going to play pro football anyway). 2) At the big schools named as "cesspools," football earns so much that it actually gives money back to the University. Also, note that they're public institutions. The "sin tax" would actually have to at least partly revert back to the University to make up for lost revenue--unless we're making the taxpayers and students pay more instead of the sports fans specifically.
Jeffrey, Oct-07-2011
I don't have any sympathy for the "poor abused players". They are adults and should make adult choices. During our college years, most of us chose between 1) our academics, 2) extra-curricular activities and/or a job to help support ourselves, and 3) our social life. The right choice is to focus on academics first -- after all, that is why you are at the University. Instead, athletes often focus on their sport and their social life. In other words, they make a bad choice. It should be noted that they have all of the same choices that any other prospective student has -- plus one. The one additional choice is to put in approximately 1,000 hours per year of effort to obtain tuition, room & board, etc. worth somewhere between $15,000 to $50,000. Note that this $15 - $50 per hour wage is tax free. It's unlikely that they could get anything like that level of pay anywhere else. Even those who don't graduate (or don't even know how to read at the end of their eligibility) got what they wanted -- a good time. Otherwise, why wouldn't they simply walk away?
Ron Thomas, Oct-07-2011
The missing choice
Ron, young athletes in football and basketball are missing a choice. Not everyone is best served by being lockstepped in 18-22 being their "college years." But if a young football or basketball player wants to pursue (or try to pursue) a pro career, he essentially has to go to college because there are no minor leagues worth mentioning. By contrast, in baseball and hockey, the pros maintain their own vigorous minor leagues. The kid who would be better off postponing college until the major-league career dream is dead or who would not profit much from college at any age, has an option that doesn't require him to go to college when what he wants to do is play ball. (Baseball and hockey used to cut out the other choice, as it was once very difficult to make the majors or NHL from college, but that's not been true for a generation or more now). Anyway, give football and basketball players the choice baseball and hockey players have -- if they want their "college years" to be part of their athletic career, fine, but don't force it.
Brian, Oct-08-2011
Taxes and Touchdowns
Since collegiate football and basketball conferences are serving as uncompensated minor leagues for the NFL and NBA, serious consideration should also be given to the imposition of steep taxes on all NFL and NBA advertising, television broadcasts, logo merchandise sales, and gate receipts.
Frank G. Splitt, Oct-09-2011
There's always a reason
College football players derive utility from playing college football, and they pay the requisite price. For example, the average football player benefits from (1) friendship, team spirit, and social life; (2) believe it or not, some football players enjoy playing football; (3) they have a shot at making the NFL, which has real value as well as value derived from their anticipation; (4) college football players can choose to study or not, and there's no reason why they shouldn't be able to get a degree if they try; (5) scholarships; (6) most potential employers would be impressed.
Wesley Kelly, Jan-27-2013