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.