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Athlete taxes hit the fans
Athletes income taxes might be popular, but such efforts don't cut general tax burden.
April 15, 2005: 9:20 AM EDT
A weekly column by Chris Isidore, CNN/Money senior writer.
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NEW YORK (CNN/Money) - Even in mid-April, the public does not despise all income taxes.

Collecting money from millionaire athletes playing in government-financed stadiums seems pretty popular.

The Indiana General Assembly, which is in the process of considering funding for a new football stadium, has heard legislative proposals to tax everyone who would work in the stadium.

That would hit the lowly paid hot dog vendor, of course. But it would be primarily aimed at grabbing extra money from both Colts star Peyton Manning ($9.8 million a year in base pay) and visiting millionaire players, as well.

Meanwhile, the Missouri state legislature is weighing changes to its out-of-state athletes and entertainers tax to direct the millions collected from that tax to cultural institutions and stadiums around the state.

The concept of individual states taxing traveling athletes is not unique to these two states. Professional athletes are generally required to file more than a dozen state income tax returns to give each jurisdiction a slice of tax money for games played in those places.

That seems like no great hardship for deep-pocketed stars, many of whom probably attract more accountants than groupies. But the laws also apply to minor league athletes -- for whom the latest tax software might be a budget buster.

The effort to collect money from visiting athletes seems more stunt than sound public policy initiative. You don't see states trying to determine the number of days that out-of-state millionaire corporate executives visit.

Indianapolis Deputy Mayor Steve Campbell said that the athlete taxes are more politically palatable than asking the general voters to pay more in income or sales tax to finance a stadium or arena.

"That's an easy answer. It's tough to argue against it," said Campbell.

If the law passes, consumers in Indianapolis and the surrounding eight counties will have to pay 1 percent more on purchases in restaurants and bars to build a new $500 million home for the Colts.

Even in places with athlete taxes, what generally gets approved is shifting income tax money that would otherwise going to the state's general coffers to the specific use of stadium finance.

Since 1997 there's been a 3.4 percent income tax for those working in the Colts' current home, the RCA Dome, or the nearby basketball arena, the Conseco Fieldhouse. Proceeds from that tax go to pay the bonds used to build the arena. But that tax provision simply reduced shifted the income tax that the city and county would have collected otherwise.

That's also the case in the Missouri law, where the $28 million collected last year went into the general fund. If it now goes to a dedicated fund for the state's two football stadiums, the Kansas City baseball stadium and the area around the Cardinals' new ballpark, it doesn't do anything to lessen the tax burden on individuals.

The amounts raised by these efforts to capture the athletes' income tax also aren't enough to pay the hundreds of millions that it costs to build their new facilities.

The state of Missouri is already on the hook for $12 million a year to pay for bonds used to finance the Edward Jones Dome, home to the St. Louis Rams. Its share of the athlete tax won't cover that payment by itself.

"The intention there is to get general revenue out of funding that stadium quicker," said Ann Stock, legislative assistant to Missouri State Senate Majority Leader Charlie Shields, one of the sponsors of the bill.

Politicians like to throw money at stadium and arena construction because of how popular that makes them with fans of the teams, but at the same time they want to convince the non-fans they're not the ones paying for the construction costs. Hotel and motel taxes are another method that legislatures sometimes use to convince voters that someone else is being stuck with the bill.

It might give taxpayers a vicarious thrill to think of their least favorite athlete filing dozens of state tax forms on April 15. But by giving politicians the cover to spend the money on stadiums and arenas in the first place, those taxes probably hurt you more than it hurts him.

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