On Baseball’s Opening Day, Ticket Prices Continue to Explode Thanks to a Government Subsidy

As was noted in a New York Times Op-Ed this morning, professional sports ticket prices have continued to explode.

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.

So what is the primary cause of this “price explosion?” If you guessed a completely unnecessary government subsidy, which allows businesses to write off tickets as entertainment expenses, you would be correct.

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.

So while many families are struggling to make ends meat, businesses are able to write off sports tickets as an entertainment expense? If you don’t see something wrong with this picture, you should. I’d argue that this government subsidy is directly responsible for pushing ticket prices through the roof for the average sports fan and their families.

These business deductions also seem to be influencing the design of new ballparks. More seating space is being dedicated to premium priced skyboxes, while total seating capacity has experienced a downward trend. Let’s take the new Yankee’s Stadium as an example, since most of us hate them anyway (I’m a Mets fan!). The old ballpark had a total capacity of 56,866 seats and the new ballpark has a total capacity of 52,325 (includes standing room); and the old ballpark had a total of 19 luxury suites, while the new ballpark now has 56 luxury suites.

As the Op-Ed notes, Congress has on several occasions taken measures to limit the scope of this deduction.

In 1962, it placed limits on the deductibility of business entertainment generally. In 1986 it restricted the deductibility of luxury skybox tickets to the face value of non-luxury premium tickets, like center-court seats at a basketball game or behind-the-plate seats at a baseball game. For example, if a ticket to a skybox suite cost $500 and a seat behind the plate cost $100, a business could deduct only $100, subject to other limitations on deductibility.

A smaller capacity sports ballpark or arena would obviously help to drive up the cost of “non-luxury premium tickets” and subsequently lead to higher prices on general admission tickets. The end result is that by artificially driving up the cost of these premium tickets, owners are making it a bit easier to push their higher priced skybox seats, while making things less affordable for the average fan. The other reality is that the price difference between skybox and premium seats have ultimately shrunk; thus, pretty much eliminating the purpose and effectiveness of the 1986 skybox restriction rule.

I understand that this is business, but should American taxpayers really be providing subsidies to businesses for entertainment expenses? The Op-Ed rightfully notes that

ideally, Congress would get rid of business-entertainment deductions altogether — after all, they are little more than an excuse for corporate executives to consume luxury items at a discount, distorting markets and cheating the public out of substantial tax revenue.

I do agree, however, with the writer of the Op-Ed that the most feasible approach may be to just set a fixed amount of deduction per seat, since the current skybox method doesn’t seem to be an effective approach any longer.

It’s time to return “America’s pastime” to the average fan (and by the way, Let’s go Mets!).