The Corner

Politics & Policy

On Walker’s Stadium Subsidy

I’ll start with a few caveats. I’m a fan of Christian Schneider; I don’t know the ins and outs of this stadium deal in Wisconsin as well as he does; and even if Scott Walker is wrong about the stadium, I don’t think it’s a reason to oppose his presidential bid. With all of that out of the way: I’m not convinced by Schneider’s defense of the deal and especially by his denial that it constitutes using “taxpayer money” to finance a basketball arena.

Schneider responds to complaints that Walker is doing a favor for a campaign contributor by noting that many Democrats support the deal too. That’s not much of a defense. Sometimes government subsidies benefit several businesses, some of whom give to Republicans, some of whom give to Democrats, and some of whom give to both. And sometimes these government subsidies have bipartisan support. Think of the Export-Import Bank, which has become Exhibit A in the case against crony capitalism.

Schneider writes that some of the bonds for the stadium

will be financed with state tax revenues, but there’s an important catch — the remaining $3.5 million per year the state will pay over the next two decades is more than offset by the annual income taxes the Milwaukee Bucks franchise pays the state. According to state records, the Bucks pay $6.5 million per year in state income taxes. Every NBA player who comes to Milwaukee to face the Bucks pays a portion of his income to Wisconsin. This isn’t expected revenue from future economic development — this is money already being paid to the state. Thus, “taxpayers” won’t be paying the state’s portion, the Bucks will be.

I might be misunderstanding Schneider’s point, but it sounds like he’s saying that you’re not getting subsidized if you pay more taxes than you get from the subsidy. Another enterprise that paid $6.5 million per year in state income taxes wouldn’t have $3.5 million of state tax revenues helping to finance some of its expenses, right? So an enterprise that does is getting special treatment at the expense of taxpayers.

He continues, “More aid will go to finance bonds issued by the local entertainment district, which will be partly paid for by a combination of the per ticket user fee and existing hotel-room, rental-car, and food-and-beverage taxes levied by the district.” So, in other words, taxpayer money goes to the stadium—just as the critics say.

“The remaining $47 million will come from the creation of a ‘tax incremental financing district.’ Such TIF districts are typically funded with revenues generated by the locality itself.” The idea behind TIFs is that you fund a project out of the extra revenues it generates, and leave area taxpayers unharmed. In practice, though, TIFs notoriously count revenues that area governments would have accrued anyway—and therefore some large fraction of the money, unknowable in advance, is a drain on taxpayers.

Finally, Schneider writes: “It’s also worth pointing out that the Bucks’ current owners and their former owner are ponying up $250 million of their own money to pay for the arena—so it isn’t as if they aren’t also personally invested in the project. Scott Walker isn’t just handing them a gift.” Sure, but a lot of government subsidies ask something from the subsidized. Agribusinesses have to go to a lot of trouble to benefit from farm programs. They’re still getting a gift.

Schneider’s strongest argument is this one: “If the team were to leave the state—the threat that loomed over negotiations for a new arena—that money in the state budget would have to be made up somewhere. State taxpayers would likely feel the brunt of the shortfall in one way or another.” I tend to think governments should concentrate on getting the basics right (schools, crime, taxes, roads) rather than on making deals with particular enterprises. If I’m wrong, though, that’s a case for making taxpayers subsidize the stadium. It’s not a case that there’s no taxpayer subsidy to see here.

(disclosure)

Ramesh Ponnuru — Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.

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