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.