The House Ways and Means Committee held a hearing June 30 to review federal tax policy in the multibillion-dollar sports industry. Lawmakers and expert witnesses focused on two issues: the tax challenges facing college athletes with name, image, and likeness (NIL) income, and the public subsidies flowing to professional stadiums.
In his opening statement, Chairman Jason Smith (R-MO) argued that tax-exempt bonds for stadium projects are failing to deliver the local investment and jobs they promise. He cited the Kansas City Chiefs’ decision to leave Missouri for Kansas as an “example of corporate greed triumphing over community benefit,” reflecting a trend in which teams leverage communities for taxpayer dollars.
Ranking Member Richard Neal (D-MA) argued that professional sports have grown unaffordable for the average fan, turning the “great national pastime” into “a luxury experience for the very few.” The focus, he said, has drifted from the stands to financial maneuvering, where “teams have become assets bought and sold by billionaires, leveraged by investment firms, and squeezed for tax preferences.”
Navigating the NIL ‘wild west’
Sam Acho, a former NFL linebacker and ESPN analyst, put a human face on the NIL era. He told the committee about a freshman at a Southeastern Conference school who earned $750,000 in a single year. When a school official asked how much remained, the player pulled up his phone and showed a balance of just over $6,000.
“And no, he hadn’t been making estimated quarterly tax payments,” Acho said. The 18-year-old, who “didn’t know how taxes worked,” was left with a $320,000 tax bill, not counting penalties and fees.
Acho framed the problem as structural rather than personal. “The tax code wasn’t written for a 17-year-old college football player who’s coming into sudden wealth,” he said. His recurring message was that young athletes need help navigating sudden money. “Players need advocates, not fans,” he said.
He was pointed about schools’ priorities, saying many institutions are “trying to do their best to win games and not worry about the athlete.” Too often, he added, “these athletes are just rented players.” Acho said his own goal is to “be the most trusted advisor in an athlete’s life” and to “speak up for those who cannot speak up for themselves.”
Thad Madden, a NIL tax consultant and former IRS revenue officer, explained why the money slips away. College athletes, he said, “are self-employed, independent contractors with no taxes withheld from their earnings.” His recommendation was that “any federal legislation focused on NIL should require some form of mandatory withholding.”
Representative John Larson (D-CT) asked Madden whether athletes owe FICA taxes. Madden confirmed they do, owing the full 15.3% with nothing withheld up front. “Oh, it’s not taken out, there’s no withholding,” he said.
Robert Raiola, a CPA who directs the sports and entertainment practice at PKF O’Connor Davies, described the planning he does for NIL earners, including claiming “sports-related deductions, such as agent fees and other ordinary and necessary business expenses.” Financial literacy, he said, “is extremely important, and that’s the one way that this must be taken care of almost immediately.”
The stadium subsidy debate
Dennis Coates, an economics professor at the University of Maryland, Baltimore County, told the committee that stadium subsidies rarely produce the promised economic returns. “Generally speaking, whatever a proponent of building a stadium tells you, move the decimal place one to the left,” he said, putting the true impact at roughly 10% of what boosters claim.
Coates walked through the mechanics of tax-exempt bonds. State and local governments issue the debt and, because of the exemption, borrow below market rates. But current rules strongly discourage using stadium revenue to repay the bonds, because doing so would convert them into taxable private-activity bonds. As a result, he said, governments turn to “other sources of revenue,” from general funds to sales taxes and levies on tobacco and alcohol, “things that don’t have anything to do with the stadium.”
Pressed by Chairman Smith on what relocations cost the communities left behind, Coates distinguished two scenarios, using Missouri as the example. When the Rams left St. Louis for Los Angeles, he noted, fans lost their team outright. The Chiefs’ move to the Kansas side of Kansas City is different, because it stays within one metropolitan area. Even so, he said, “I don’t think Kansas is really getting anything except for the bill,” predicting the venue would generate little net economic gain.
That skepticism runs throughout his research. Any spending inside a new stadium, Coates said, is “money you’re not spending someplace else in the community,” making the effect “just a swapping of one place for another” rather than real growth.
Asked by Representative Terri Sewell (D-AL) how communities could see more benefit, Coates said that for a professional venue, the owners themselves should build it. That way, he added, “whatever benefits are generated by having that facility in the community will redound to the community.” He drew a sharp line at public projects, saying tax-exempt financing makes far more sense for a university stadium or other public entity that provides a genuine public service.
His preferred federal fix was blunt. Coates urged Congress to “remove the ability of state and local governments to use tax exempt bonds to finance stadium subsidies,” an idea he noted has been debated for four decades without action.
He acknowledged the political difficulty. Pressed by Ranking Member Neal on what localities could demand if subsidies continue, Coates described the bidding war among cities as a “prisoner’s dilemma” that unravels the moment one city breaks ranks. The only durable answer, he said, is for leaders to “hold the line.”
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