Are Taxes the Real NFL Scandal?

As the media furor heats up for Super Bowl Sunday, it’s a good time to look back on the seemingly unending list of the scandals from this past season. From domestic violence, to child abuse, to head injuries and lifelong debilitating injuries, to botched crisis control, to underinflated footballs, it’s been a rough year for the league.

The scandal that’s received the least attention is the fact that the NFL does not pay taxes.

Tucked into the tax code is a loophole that allows trade organizations tax exempt status, even ones that make nearly $10 billion and pay their CEOs $44 million a year. While others have rightly pointed out that individual teams pay taxes, the league offices are exempt. This constitutes a multi-million dollar taxpayer-funded subsidy. The main beneficiaries of this tax loophole are the team owners, over half of which are billionaires.

This tax subsidy comes alongside the even larger subsidies doled out to teams from state and local governments to build stadiums, the economic impact of which has repeatedly been shown to be dubious at best. Remarkably, while the Super Bowl is a guaranteed windfall for both teams and the television network covering it, Glendale, Arizona, the town hosting the game, is projected to lose money.

A plan to close the league’s tax exemption was recently proposed by Congressman Jason Chaffetz (R-Utah), which would raise $109 million over 10 years according to the Joint Committee on Taxation.

This recent effort builds on previous efforts including a proposal last year from Senator Corey Booker (D-NJ) that would use the revenue to fund domestic abuse programs, one from Senator Maria Cantwell (D WA) that specifically called for the Washington D.C. franchise to change its name, and one from now retired Senator Tom Coburn (R-OK) that he claimed could raise more than $90 million a year.

The additional revenue could be used to address a host of issues facing the country, the most pressing of which were recently outlined neatly by Senate Budget Committee Ranking Member Bernie Sanders. However, the revenue raised from ending this tax loophole is minimal by comparison to closing the billionaire loophole in the estate tax or the trust fund loophole in the capital gains tax.

Nevertheless, ending the tax exempt status is not about raising additional revenue. As Jordan Weissmann points out in Slate, “The deeper issue at play here is that nonprofits exist to do things for the public good—things that for-profit companies generally don’t do. That’s why we give nonprofits a break from the IRS. And it’s why the government should be stingy about which kinds of organizations count and which don’t.” The NFL exists to do exactly what for-profit companies do – maximize profits for its shareholders, in their case the team owners.

Solving the domestic violence and concussion crises at the NFL is going to be difficult and painful for many. Addressing their tax status takes a simple act of Congress and could be done today. Regardless of which team you root for, we can all cheer for an end to this absurd loophole.

Josh Hoxie tracks the debate over the estate tax for the Institute for Policy Studies Program on Inequality and the Common Good.