The Super Bowl of Taxes


Did you watch Super Bowl XLII? It turned out to be a great game in the fourth quarter. But it is the aftermath of the game that is interesting for political junkies. As it turns out it wasn’t just a great game and a financial success for the NFL, sponsors, television networks, and local businesses; it was a huge success for state and local government.

In fact, for Phoenix, Arizona and is surrounding suburban communities, it was a trifecta of plentitude. In the space of ten days the Phoenix metro area hosted the internationally known Barrett-Jackson automobile auction featuring exotic (and expensive) automobiles, the FBR Open (formerly known as the Phoenix Open) featuring Phil Mickelson and a host of golf’s greats, and Super Bowl XLII featuring just about everyone in the world.

That’s because, unlike Oregon, Arizona relies on a sales tax for its primary source of revenue. That’s because those visiting Arizona contribute to state government at the same rate as those living there. And that’s because Arizona works diligently at lowering its tax burden on business and residents in order to attract and maintain economic growth.
According the to the NFL, the economic impact of a Super Bowl on the host city, Phoenix, Arizona, is somewhere in the vicinity of $400 million. It is calculated using historical data and assumes that eighty-five percent of the 79,000 attending the Super Bowl came from out of state, that an additional 50,000 non-ticket holder from outside the state came to enjoy the surrounding festivities. Each attendee and non-attendee reveler stayed an estimated 4 days and spent somewhere between $1500 and $2000 in area hotels, restaurants and bars. In addition to the individual spending there is the corporate spending on sponsorships, suites, shows, limousines, private jets, etc. That $400 million does not include the multiplier effect of any non-local money injected into an economy.

Similar calculation put the economic impact of the Barrett-Jackson auction at about $150 million and the FBR Open at about $180 million. In the space of ten days outsiders pumped over $700 million into Arizona’s economy and the state and local governments received nearly $60 million dollars in sales tax revenues – $60 million dollars from out of state visitors who had a minimal impact on government services (other than police and fire for the short four days they were in attendance).

Assuming that Oregon had the facilities and the desire to attract similar events with similar economic impacts to Oregon, what would have been the impact on state and local government? In terms of direct contribution by those visiting the state the impact would be zero — nada — nothing. (Yes, I know there are hotel taxes and transportation taxes but Arizona has them too and so, on a comparative basis, the direct impact would still be zero.) Yes there would likely be an increase in income that was subject to tax. Let’s make a generous assumption that such businesses realized a healthy pre-Oregon income tax of fifteen percent. Oregon’s take would be the six percent tax on fifteen percent of $600 million or $5.4 million — a pretty paltry amount compared to $60 million.

Oregon has watched in manufacturing base erode annually, its construction base similarly dissipate and its forest industry practically disappear continued reliance on income taxes is insanity. The growth in Oregon’s service industry cries out for a sales tax to shift a portion of the burden of government to those visiting from out of state.

But it is the politicians’ insistence on treating the sales tax as yet another source of revenue instead of a replacement source of revenue that will ensure that a sales tax never happens in Oregon. Meanwhile the tax burden on Oregonians will increase annually while those visiting and using the public amenities of Oregon skate.

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  • Jerry

    The only way Oregonians should ever even consider a sales tax is if it TOTALLY replaces the state income tax 100%.

  • John Fairplay

    It’s not only the facilities and the desire that are necessary to host events such as the Super Bowl. You also need organizations and individuals across the nation that see your city as a desirable place to visit/vacation. While Oregon enjoys a reasonable level of tourism, the bulk of it comes through visitors from Washington, Idaho and California. Those from other parts of the nation – small in number and mainly tree worshippers – are uninterested in Portland and spend little money as they traipse through the “wilderness.”

    Portland will never compete as a “destination” for large national events of any kind. As the press noted, the recent Davis Cup tennis matches brought in people from all over who were treated to a dismissive attitude by the locals of the event. Not only is Portland not interesting enough – it isn’t interested enough.

  • Britt Storkson

    If we’re going to have a tax how about everybody pays the same rate?
    What’s the problem with that? The very rich and very poor do not pay taxes (relative to what they make) yet they have the power to vote taxes on somebody else. If we’re going to have a tax why not enforce it equally on everyone? As detailed in http://www.theprotectionracket.com the fastest way to get rid of a tax is to enforce it uniformly.

  • CRAWDUDE

    Hey, I have to agree with Jerry on this. Its too bad that the state governments track record is so poor that they don’t trust them enough to give them a dual tax system, divided between sales and income.

    The Oregon voters have said no so many times that the suggestion conjures up groans from the studio audience.

    I would love to see this state go to a sales tax only tax system, it seems to work for other states and it would simplify taxes every year!

  • Bob Clark

    Seeing how Blue Oregon has become, I wouldn’t trust a swap of income tax for sales tax even if placed in the state constitution. That said, being retired and waiting for my wife to retire, Oregon’s 9% income tax rate is really making me look seriously at moving across the Columbia to Vancouver or Washougal as a retirement destination. Especially if Rossi wins the governor’s race, bringing political gridlock. So, swapping income for sales tax in Oregon only works if trends change and political gridlock reappears in Oregon.

    • CRAWDUDE

      Gridlock was good! When I retire, it’ll be inside of a day before I move. The income tax makes it almost impossible to retire in this state.

  • rural resident

    Oregon and Arizona are different in many ways — and not just in their environments and climates. For one thing, Arizona has a much more balanced tax structure. It has both an income tax and a sales tax, as well as property taxes. This defeats the argument of some that Oregon will be heavily disadvantaged if it has both.

    The biggest difference is in their relative attitudes toward growth and development. Arizona generally promotes development, Oregon discourages it. The economic philosophy down there is “can do.” In Oregon it’s, “why should we?”

    • CRAWDUDE

      This is true but the tax rates are significanly lower in many states with the 3 levels of taxation. I don’t know what Arizona’s rate are but Minnesota has a similar program.

      Income: Graduated up to 7.45% income tax

      Sales tax 6.50% in most cases.

      Property tax: nominal, for my house that I pay $2800 for per year here, it would be $240 a yer there.

      Basically they have an income and sales tax system. If Oregon government wanted to get a sales tax, they would have to eliminate one of the others.

      Getting rid of the income tax would guarantee passage by the voters. Getting rid of property taxes would probably be harder since most is dedicated to specific programs.

      You are right, it would work………………….. if the people in this state felt the government was trustworthy, unfortunately they do not.

  • Dave A.

    Great article Larry! I doubt that the clowns that run things in Oregon will ever do anything of major importance. They have some of the most inbred, clueless schmucks running things here that I have ever seen. The University of Oregon is trying hard to make the 2008 Olympic Track & Field Trials into a mjor event. Want to bet it will be a marginally attended event that is quickly forgotten? Just for starters, Eugene is literally in the middle of nowhere. And air service to that area leaves a lot to be desired. Oh – and let’s not forget how few first rate hotel rooms there are in Eugene. Sorry – but people with serious money will not be coming any time soon.

  • josh reynolds

    Dave

    The 2012 Trials are also coming to Eugene as well as the 2009 and 2011 national championships. I believe the 2010 NCAA Track and Field championships are also coming. You are right about the hotel rooms in Eugene, that is why they are being built in Springfield. When the new full service Holiday Inn and Embassy Suites are completed in Springfield, that will be about 1200 rooms in Springfield, the largest cluster of hotel rooms on I-5 between Seattle and Sacremento. It is too bad you focus on only Eugene when most of the major economic development this decade has been happening in Springfield. The problem is the folks in Eugene, and maybe yourself, still think the leaders in Springfield’s knuckles drag the floor.

  • Jerry

    The only way stuff happens is for people to take action, like they did in AZ years ago. It is now paying off handsomely for them.

    Oregon does not have the people, the will, nor the know-how to do what they have done in AZ. It is as simple as that.

    Think small – that should be Oregon’s slogan to replace We love dreamers.

    And, Bob, you would not be alone. The number 1 destination state for people from Oregon is Washington. Why do you think that is??