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Tear Down This Tax Loophole

A way to tackle sports-ticket-price inflation.

2:39 PM, Apr 5, 2010 • By MATTHEW CONTINETTI
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Richard Schmalbeck and Jay Soled have a good idea:

Over the last two decades, the average ticket price for a Chicago Cubs game has increased 265 percent, more than four times the inflation rate. Add in parking, concessions and souvenirs, and a family trip to one of this week’s opening day games could easily cost a few hundred dollars.

There are many reasons for the price explosion, but a critical factor has been the ability of businesses to write off tickets as entertainment expenses — essentially a huge, and wholly unnecessary, government subsidy.

These deductions have led to higher ticket prices in two ways. On the demand side, they have fueled competition for scarce seats, with business taxpayers bidding in part with dollars they save through the deductions.

On the supply side, the large number of businesses bidding for expensive seats has driven the expansion of luxury skyboxes and a reduction in overall seats in new ballparks.

While baseball parks built in the 1960s and before held as many as 56,000 seats, the modern trend is toward smaller-capacity parks, with a higher percentage of total space dedicated to skyboxes. The new Yankee Stadium, the only major-league park built since 2000 with more than 44,000 seats, has 3,000 fewer seats than its 1923 predecessor but almost three times as many skybox suites.

The authors concede that eliminating the tax deductibility of tickets to sporting events is unrealistic. Instead, they propose capping the deduction at $50, which would make going to the ball game more affordable. Attendance would increase. For his part, though, the president probably won't want to go near a ballpark after today's first pitch.

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