We have covered the rollercoaster ride of bringing a Major League Soccer team to Saint Louis for a few months now. The turbulent trip culminated in a proposal to raise the city’s use tax—essentially a sales tax on businesses—to provide $60 million in public funding for a soccer-specific stadium near Union Station. You can read Show-Me Institute analysts’ concerns regarding public support for sports stadiums here, here, and here.
In this post I’d like to address something besides the economic issues with subsidizing stadiums. And that’s the claim (see page 13 here) that “if you aren’t a business paying the Use Tax or don’t go to the stadium, your money will NOT be used for this project.” This claim is simply incorrect.
To understand why, we need to look at how the stadium proposal is connected with another proposed tax-hike. There is a proposal to increase the city’s sales tax rate by 0.5%, with the new revenue dedicated to MetroLink expansion and other “economic development” projects. If approved, this increase in the sales tax (on goods purchased in the city) will trigger an increase in the use tax (a tax paid by businesses on goods purchased outside of the state but used in the city). The money that would be generated by an increased use tax isn’t dedicated to a specific purpose—at least not yet. Funding for the soccer stadium would tap into this new use-tax revenue. But that new use tax revenue will only exist if the sales tax hike is first approved. So, in short, to dedicate use tax revenue for the stadium, taxpayers would have to approve a sales tax hike. And to increase the city’s sales tax rate is to make city residents pay for the stadium, whether they visit it or not.
In addition, the use tax increase will ultimately be paid by consumers—again, city residents included—through higher prices. Businesses in the city will initially pay the higher use tax, and while they may try to absorb some of the cost, it is nearly inevitable that they will pass some of it on to consumers. And when city residents buy goods and services from city businesses, they will end up paying the increased use tax (in the form of higher prices). Again, city residents will pay for the stadium, just not directly.
The claim that city residents will not pay for the stadium unless they visit it is specious. Taxpayers deserve straight-talk where their money is concerned, and in this case, they don’t appear to be getting it.