Just a few dollars more

For those of you who wonder how schools could afford to pay student-athletes, perhaps this story about the excise tax on large salaries contained in the tax bill currently winding its way through Congress might give you some ideas.

Both the House and Senate versions of the bill include a new 20 percent excise tax on salaries of $1 million or more paid by universities and other nonprofits. Universities also would take a financial hit from the elimination of a tax deduction for the donations that many schools require for the right to purchase season tickets. Donors currently get to deduct 80 percent of those contributions. Without the tax break, giving could plummet.

How schools would absorb those costs is an open question. But economists and other experts say an excise tax is not the best way to drive down coaches’ salaries or combat the widespread public perception they are overpaid.

In its most recent survey, USA Today found 78 football coaches and 41 men’s basketball coaches making $1 million or more, topped by Nick Saban’s $11.1 million salary at Alabama. If the tax proposal does become law, Alabama would face a $2.24 million tax bill every year.

That’s some major jack, even for ‘Bama.  What to do, what to do?

Tom McMillen, a former Democratic congressman from Maryland who is now the CEO of the Lead1 Association, which represents Division 1 athletic directors, doesn’t expect the new tax to drive down salaries.

“Certainly our schools, if they have to choose between a great football team and getting a coach that’s going to deliver that and making cuts elsewhere, they’re probably going to make cuts elsewhere,” McMillen said.

The hit on universities from getting rid of the season-ticket tax deduction and adding the salary tax will be in the hundreds of millions of dollars annually, McMillen said, and he believes Olympic sports subsidized by football and basketball revenue likely will be affected the most.

But John Colombo, a University of Illinois law professor who has studied the economics of college sports, said cuts to other programs “would have to be done on the sly” to avoid an outcry from faculty. He said schools most likely would raise ticket prices or hit up their donors, arguing that more money is necessary “to stay competitive.”

The correct answer is, of course, all of the above.

There’s always more money.  That’s not the big issue.  This is:

“This is happening really quickly,” Washington athletic director Jennifer Cohen said. “I’m not sure any of us are well prepared to figure out how to manage.”

Ain’t that the truth.

15 Comments

Filed under It's Just Bidness, Political Wankery

15 responses to “Just a few dollars more

  1. Hogbody Spradlin

    “I’m not sure any of us are well prepared to figure out how to manage.” So learn, dummy.

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  2. As a rank and file season ticket holder, I don’t give for the tax break. I give as if it’s a PSL. It’s part of the price of admission, and I build that into my annual decision of whether or not to renew every February.

    This excise tax is a joke. Substitute dean of the medical school for football or basketball coach, and people would be in an uproar. The market says Nick Saban is worth $11m, and he pays a surtax on his income. No reason to whack the university for it as well. Who am I kidding? Today’s politicians are nothing but a bunch of demagogues who couldn’t make it in the real world.

    Liked by 1 person

    • 92 grad

      This kind of touches on my preferences. I’m generally conservative, I think the majority of our laws, policies, and regulations exist because our society has degraded to the degree where people won’t do the right things unless they are forced to, and same for morality and crime. So naturally my angst comes from the fact that our government grows in size and power mostly because people suck. My experience tells me that liberal politics enjoys this “save us from ourselves” control more than conservatives but recently I just think we are in a hopeless death spiral with both parties.

      Anyhow, it’s very frustrating that reworking the tax code is finally being worked on only to kind of miss the whole point which is to make taxation directly related to a persons consumption. This possible athlete compensation burden will be passed on to students and the universities will also use the excuse to make cuts anywhere they desire.

      Liked by 1 person

      • I’m a fan of an appropriately designed consumption tax as well. Both parties use the tax code to reward their friends (especially donors) and punish their enemies. It needs to end and that huge IRS building in Washington needs to be torn down and turned into a park. Once again, who am I kidding!

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  3. Borodawg

    Unfortunately, the $2.24 million will be passed on to the students as an additional or increase in fees.

    https://studentaccounts.ua.edu/other-fees-and-expenses-general/
    Notice the line at the top of the website. “The following list of fees is not necessarily exhaustive, and the amounts are subject to change without notice.”

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  4. JasonC

    Good thing we have a reserve fund for just such an emergency.

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  5. dawgfan

    Us section 300 folks are contributing around $300 per seat for the right to renew. That’s approximately a $240 tax deduction and about $80 per seat tax break. That’s on a total outlay of around $600 per ticket (contribution plus ticket cost) IF you itemize. This in itself is not a big deal but I see it more as having a piling on effect along with other costs to attend games. Eventually it will have an impact.

    As for the 20 per cent excise tax, there is in excess of a $20 trillion federal deficit and tax must be collected. Even though this is a potential small source of revenue, it will not be seen as controversial or unpopular to most voters. It also sends a message to the university’s governing bodies that they are accountable. Maybe congress has been watching these coaching arms races like the rest of us have. Maybe congress figured if these bozos can afford to pay multi million dollar buyouts on top of multi million dollar coaching salaries they can afford to pay some additional tax. Sounds like sound tax policy to me.

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  6. 69Dawg

    As a former IRS Agent Non-Profits are the most abusive organizations the tax law ever allowed. Don’t get me wrong most of the REAL charities are good but you only need to look at the returns of most of the non-profits to see them for what they are, tax shelters for the rich or play money for the Administrations. The IRS does not devote enough audit resources to the Non-profits so they literally get away with noncompliance. The new tax bill should not single out universities for this excise tax, they should do it for any officer of any non-Profit. It would shock everyone to know how many over one million dollar executives are in the non-profits.

    If you want to bitch about the new tax bill the medical deduction would be the best place to start. If the congress really cared about healthcare they would, as a minimum, allow the full deduction of healthcare expenses. None of the 10% of AGI BS. They have never really cared about the middle class people that have really large healthcare costs. Oh well that’s why I left the Service and became a tax attorney to fight them.

    Liked by 2 people

    • Chi-town Dawg

      69Dawg is absolutely right about the compensation for non-profit executives. A couple of years ago the Chicago Tribune published a list of salaries for some of the larger non-profit organizations in Chicago (Field Museum, Shedd Aquarium, etc.) and my eyes popped out of my head when I saw how much these executives were being paid. They maybe running non-profit organizations, but you’d never know it by how much money many of the executives were being paid. No doubt there’s alot of abuse going on in this area.

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  7. Not an issue at all…coaches (actually their agents) will just negotiate in post-tax dollars like they do in many countries for soccer (see Cristiano Ronaldo).

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    • They do already but aren’t up front about it. I imagine they know the client expects to clear $Xm. Therefore including the agent’s fee and applicable taxes, the number is X+50%.

      The difference here is that the employer is getting hit with an excise tax in addition to the taxes the coach pays.

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  8. 202dawg

    Yet churches still escape untaxed, and (BONUS) can now wade deeper (many already tell you who to vote for) into the slimy pool of politics. I don’t even recognize this country anymore.

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