The Tax Cuts and Jobs Act, which includes legislation prohibiting corporations from deducting 50% of entertainment expenditures from their tax bill (a longstanding tradition), has businesses taking “a hard look at their entertainment budgets.” New law designed to minimize the government’s subsidy and streamline tax code will save the government $2 billion/year and $23.5 billion through 2027. Ironically, the most profitable corporations are likely to experience the least impact, as the new 21% corporate tax rate is just 3.5% (top rate of 35% with a 50% subsidy is 17.5%) above what they’re used to paying; whereas a struggling company paying less than 35% could see a significant increase.
Howie Long-Short: It’s estimated that U.S. Corporations spend “hundreds of millions” annually on entertaining clients at sporting events, so a short-term decline in team revenues could be on the horizon. While that’s not going to please team owners, it should result in some premium seating at reduced pricing for real fans. If you’ve ever wondered why corporations spend so much on tickets, check out this study. It was determined after evaluating 5 million tickets with an average price of $366/ticket (owned by 400 companies), that there’s a ROI of 1,998%!
Fan Marino: While on the topic of government legislation, MLB is urging Congress to pass a bill that would keep minor league players (considered seasonal employees, not protected by the MLBPA) exempt from federal labor laws, after several MiLB players filed lawsuits claiming receipt of as little as $1,100/mo. in compensation. That’s right, a league that generated $10 billion in 2017 revenue is lobbying to pay future talent less than minimum wage. MLB owners are ruthless; they want their prospects to work for free and then try to limit big money deals to 3 years. The MLB player cash grab is over.
Interested in Sports? Sports Business? Sports Finance? Sign-up for our free daily email newsletter list, here!