October 10, 2017; CBS Sports
Last weekend, Vice President Mike Pence conspicuously departed an Indianapolis Colts NFL game post-anthem protest in an apparent pre-planned protest that cost the nation some $250,000.
At 6:30AM, on October 10, @realDonaldTrump tweeted, “Why is the NFL getting massive tax breaks while at the same time disrespecting our Anthem, Flag and Country? Change tax law!” As of this writing, that tweet received nearly 100,000 likes.
This tweet was part of a four-tweet predawn outburst that included a shot at Democrats concerning immigration, a promise to provide healthcare “with the power of the pen,” and his ratings-based criticism of ESPN’s Jemele Hill. By 8:13 a.m., Trump was tweeting about a new self-help book about himself, The Art of the Donald: Lessons from America’s Philosopher-in-Chief.
We assume that by tax breaks, Trump is talking about the league’s former tax-exempt status. But, if this is the case, President Trump cannot use federal tax law to penalize the National Football League because it already voluntarily relinquished that status as an unincorporated nonprofit 501(c)(6) trade association in 2015 following public criticism. Today, the NFL is subject to tax like each of the NFL teams—except for the nonprofit, community-owned Green Bay Packers. The NFL also no longer has to publicly disclose its tax returns, which include the salaries of its top executives. In terms of the NFL paying taxes, the Joint Committee on Taxation estimated that the cost to the taxpayer of the NFL exemption was previously only about $10 million a year.
Fast forwarding to the present-day national anthem controversy, President Trump might be tweeting about the tax breaks the NFL gets at the state level, including subsidies for stadiums. As in the case of the New Orleans Saints, these are local incentives and tax breaks. New stadiums are sometimes built in cooperation with cities and states that float municipal bonds (exempt from federal taxes), but that was probably not the threat President Trump was making in his 6:30 a.m. tweet.
It is unclear whether Trump can target one sports league and not the others. NPQ reported on this issue in 2015. Republican congressman, Representative Matt Gaetz of Florida recently revived this debate on Capitol Hill. Gaetz mistakenly asserts, “Though individual teams are not tax-exempt, the NFL League Office is.” Nevertheless, like Trump’s tweet, the kneeling controversy is causing many eruptions with consequences.
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It could be that Trump’s Twitter outburst had to do with his long history of antagonism with the NFL. Once the owner of the New Jersey Generals in the defunct United States Football League, Trump and other league owners won an antitrust lawsuit against the NFL, but the jury awarded only $3.76 (including interest) instead of the $1.2 billion in claimed damages. The league folded in 1985.
NFL spokesperson Joe Lockhart clarified the issue by the end of the day, saying, “The idea that we receive some sort of tax break is not true, so there’s nothing really here to give up.”
It would seem that this president continues to use the urgent and visceral Twitter platform to forgo the strenuous and conventional methods of governing, leaving bewildering wakes of anxiety and confusion for all those affected. But Twitter rants do not ultimately replace the traditional apparatus of government. Perhaps as with the actual tax status of the NFL, Trump is missing an important point about his own tax plan. While the NFL’s nonprofit status provided it very little tax benefit while it lasted, his administration is planning the biggest gift of all to the NFL.
Much of that money gets distributed back to the teams—and that’s where the potential for a giant loophole occurs. Almost none of NFL’s teams are public corporations but so-called pass-through businesses. Under the tax framework negotiated by the White House and Republican leadership, owners and investors of pass-through businesses would see their tax rates fall from a maximum of 39.6 percent to just 25 percent.
The Tax Policy Center estimates the measure would result in $770 billion in lost tax revenue over a decade.
“This pass-through loophole is several orders of magnitude bigger than other issues,” said Seth Hanlon, a senior fellow at the Center for American Progress, a left-leaning think tank. “It’s just an enormous windfall.”
Trump’s tax plan also greatly benefits him. And that is as predictable as his disconcerting morning tweets.—Jim Schaffer