The NFL as a league has tax-exempt status. Should it? Whether income earned at the team and player level is in fact taxed? When the commissioner earns $40 million? Most tax payers would say no, and some economists would say it doesn’t really matter anyway in terms of how it would affect the league’s finances. Major league Baseball’s change from tax-exempt to tax-paying status in 2007 was subsequently deemed tax-neutral by its executives. But that’s an insider’s view of the cost of a change in tax policy. The real question is the ethics portrayed by the league, both in terms of sports and in terms of economics. Cleary, the NFL is a for-profit league and should be taxed and should avail itself as it surely will of expensive counsel, legal and financial, to minimize that tax. But should it’s star players be sheltered when engaging in violent behavior?

While the average tax-paying fan is angry at the tax-exempt status of the NFL given the spoils divvied up among owners (arguably), players, management and expensive legal counsel as well as agents, they also want winning teams. Cheats are scorned, but losers are scorned even more. In professional sports, players and coaches and staff all get paid to win. It’s even an obvious statement to say that college football is essentially professional, if not profitable. And football is a violent game and players do get concussions which may affect their behavior. All true, so what should we expect from our team’s players, and staff? Should they display Olympian ideals, whatever that means nowadays? Or is the anger simply that the average taxpayer feels that the average NFL-er (or any other professional athlete) is overpaid? The NFL seems to be trying, belatedly, to discipline players that are violent, especially in domestic abuse situations, and that may help, but is the underlying issue really that the fan loves the game but is tired of the individual player? What is a good, but not outstanding, linebacker say really worth? Or a better-than-average QB? And how does the owners penchant for overpaying distort the market?

A Winner-Takes-All market is defined as one where the best performers reap an outsized share of the rewards available and the remaining competitors are left with very little of those rewards. The definition comes from Alan Krueger, Princeton economist and departing Obama advisor and his original solution was a progressive consumption tax that would hit luxury goods hard. That would not mean taxing professional football itself at high levels – pro football is hardly a luxury good. It would mean hitting, say, Jay Cutler’s purchase of, for example, a Lamborghini with a steep sales tax. Is that fair? Has Jay Cutler earned the right to buy as many toys as his enormous bank account will allow? Greg Mankiw at Harvard would say yes he has. The innovation that Cutler arguably brings to a national pastime means he’s worth every penny and should not be discouraged from innovating by prohibitive taxes. Sports is professional at his heart nowadays. Whatever pure passion for the game itself exists, and it clearly does, it is framed by the laws of economics. So choose your law, but do not expect amateurs or innocent ethics.

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