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Tax Laws Give Sports Owners a 'Financial Magic Trick'

They end up paying lower rates than stadium workers as well as players
By John Johnson,  Newser Staff
Posted Jul 11, 2021 7:01 PM CDT

(Newser) ProPublica is out with the latest installment of its series on how the richest Americans avoid paying taxes, and this one focuses on the owners of sports teams. It begins with a look at Los Angeles Clippers owner (and Microsoft co-founder) Steve Ballmer, and an interesting contrast. A concession stand worker at his Staples Center who also works a second job with Uber reported $44,810 in income in 2018 and paid a federal tax rate of 14.1%. On the court, NBA phenom LeBron James made $124 million that same year and paid a rate of 35.9%. And Ballmer? He reported $656 million in income, but paid the lowest rate of all three, 12%. How? Thanks to tax breaks for professional sports team owners that are "detached from economic reality," explains the story.

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For one thing, sports owners are allowed to take the same deductions on assets as factory owners. But while a machine in a factory can reasonably be expected to depreciate over time, an owner's TV deal to air games will likely go in the opposite direction. "This allows Ballmer to perform a kind of financial magic trick," per the story. "If he profits from the Clippers, he can—legally—inform the IRS that he is losing money, thus saving vast sums on his taxes. If the Clippers are unprofitable in a given year, he can tell the IRS he’s losing vastly more." The story does not single out Ballmer, providing plenty of other examples. It also digs in to the history of these tax breaks, which were forged in part by legendary team owner Bill Veeck decades ago. He proudly claimed credit for a tax write-off "gimmick" that "was figured out by a Chicago hustler. Me." (Read the full story.)

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