Press Release, Issued 10/28/99
James Gibson Calls for End to Corporate Subsidies

There is considerable debate about whether the current stadium proposal is good for St. Paul. It may or may not be, depending upon the assumptions you make. But even if it is good for St. Paul, it may not be good for Minnesota. And even if we assume it's good for Minnesota, it is surely not good for the nation as a whole. It would be far preferable if the location of teams was determined based upon the economics of the viewing market, and that the construction of stadiums was done without reliance on public funding.

If subsidies for professional sports stop, professional sports will not suddenly grind to a halt. Rather, the players and owners will make less money, and the value of teams will decline. Ticket prices may rise. Then again, they may not, because presumably they are already at a point that maximizes revenue to the team. New stadiums will be built with private funding, but only in cases where there is clear economic justification for the investment.

We have a tolerance for a certain level of taxation. Beyond that point, the resistance to additional taxes grows more intense. States and cities in particular are limited in their ability to tax because their citizens and businesses have a degree of mobility. When tax dollars are used to subsidize private industry, these dollars are not available for the purchase of public goods. Thus, for example, with finite tax revenue, subsidies for professional sports teams may ultimately undermine public education.

This economic bidding war between the states must stop. This war is less than a zero-sum game. National resources are often allocated in sub-optimum ways. Business location decisions are no longer made based solely upon economic criteria, but now include the burden of political maneuvering and uncertainty.

A considerable amount of research on corporate subsidies has been conducted by Art Rolnick, Senior Vice President and Director of Research at the Federal Reserve Bank of Minneapolis, and Mel Burstein, former executive vice president and general counsel of the Federal Reserve Bank of Minneapolis (see http://woodrow.mpls.frb.fed.us/pubs/ar/ar1994.html).

Mr. Rolnick and Mr. Burstein proposed a solution to the problem of states and cities competing against each other through preferential subsidies. The U.S. Government would tax the value of any preferential subsidy at a rate of 100 percent. Such a solution would prevent, for example, cities from competing with each other for professional sports teams through public financing of stadiums. In particular, this solution would prevent another state from offering a subsidy to lure the Twins or Vikings from the Twin Cities.

If elected, I will propose federal legislation, possibly along the lines of Mr. Rolnick and Mr. Burstein's proposal, that will restrict the ability of states and cities to offer preferential subsidies, thus ending this counter-productive economic bidding war.

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