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CONTROVERSY

Twins, Wild, T-Wolves Not Happy About Proposed Memorabilia Tax

June 16, 2011 by Nick in CONTROVERSY, NEW STADIUM

Although the road costs are getting all the ink, two proposed taxes to help pay the state’s share of a $1.1 billion Vikings stadium also may prove to be stumbling blocks in completing a deal.

One is a 10 percent tax on the sale of pro sports memorabilia. A Revenue Department study in April estimated the tax would generate $17.6 million a year by 2015. But the latest state figures show it would yield just $8.1 million annually.

The tax has detractors in pro sports teams, including the Twins and the Wild, whose merchandise would be taxed to help build a football stadium.

The other tax is one the Vikings themselves have raised questions about — an income tax surcharge on NFL players who play in the new stadium. The tax would generate $7.8 million annually, but NFL officials reportedly believe it may not be constitutional.

Asked about that last week, NFL senior vice president Greg Aiello said: “We are aware of the issue and are studying it, but do not choose to comment about it at this time.”

Ted Mondale, who is Gov. Mark Dayton’s stadium czar as chair of the Metropolitan Sports Facilities Commission, said the single biggest issue to solve remains the question of how to pay for road upgrades in the area of the proposed Arden Hills stadium.

But the state’s piece of the stadium financing, along with how the team and state will share operating responsibilities, must be resolved, he said.

The state needs to find about $23 million a year to finance its $300 million share, Mondale said. With the reduced estimate in memorabilia tax revenue, it probably will have to tap other revenue streams.

“A lot of those taxes we didn’t think we needed, like the player income surcharge and others,” Mondale said. “Now we do.”

Pro athletes would pay extra

Under the stadium bill introduced in April, the state would contribute $300 million toward a new stadium with a series of so-called user fees and taxes. The Vikings and Ramsey County have agreed to pay $757 million to build a stadium on a former munitions plant site in Arden Hills.

State funding includes a 5 percent surcharge on the income earned by NFL players during games at the new stadium. The bill targets all NFL employees making more than $250,000 a year who work at the new stadium, which could include team executives.

Imposing a special tax on a select class of people could violate constitutional standards of equal protection, said David Larson, a Hamline University Law School professor who teaches labor and employment law.

Pro athletes “already are being taxed at a rate consistent with other income earners in the state,” Larson said. Taxing individuals within an income group is “problematic,” he said.

Is tax on pro sports gear fair?

Until now the memorabilia tax has been the centerpiece of several funding measures in the stadium bill, which backers hope to have ready this week should a special session be called by the end of the month to solve the state’s budget crisis.

It would steer money from the sale of Twins, Wild and Timberwolves gear — among other pro sports teams and leagues — toward building the Vikings stadium.

The Wild and Twins don’t like that idea. Neither do sports merchandisers, who fear it will hurt business.

“Our fans are going to be taxed to build a Vikings’ stadium. I don’t see the fairness in that,” said Jeff Pellegrom, the Wild’s chief financial officer.

The Twins also oppose the tax, team spokesman Kevin Smith said.

“We all want the Vikings to get their stadium, and the Vikings obviously do pay their fair share of the taxes to Hennepin County that built our ballpark,” Smith said. But a memorabilia tax would make Twins merchandise “unaffordable” to many fans, he said.

Several calls to the Wolves were not returned.

Rep. Morrie Lanning, R-Moorhead, one of the bill’s authors, wasn’t sympathetic to the sports teams’ complaints.

“They’ve benefited from their [publicly supported] facilities, and every one of them will be asking the public to support improvements down the road,” he said.

The philosophy behind the tax, he said, is that fans benefiting from the facility should help pay for it. “Through the purchase of sports memorabilia you’ve got fans who are obviously involved not only supporting the Vikings, but the other teams,” he said.

Backdoor tax on clothing?

Questions dogging the memorabilia tax revolve around fairness and effectiveness.

The memorabilia tax would be figured on the amount of wholesale sales and would be paid by retailers, who typically pass along such costs to their customers.

The bill doesn’t specify who would be subject to the tax, but the Revenue Department lists the NFL, Major League Baseball, the NHL, the NBA, NASCAR, Major League Soccer, World Wrestling Entertainment, the International Federation of Association Football and the Football Association.

Anything licensed by pro sports leagues or teams would be taxed, including trading cards, photos, sports clothing, gear and special items related to a particular player, team or event.

Pellegrom said the memorabilia tax would open a back door to a sales tax on clothing. He said such a tax might be easier to swallow if the stadium bill included a “global solution” for helping to fund all the pro sports arenas in town.

But the bill would have the Vikings paying a little more than one-third of the cost for their new stadium, he said, while “we’re paying 86 percent of our building costs.”

Opponents of the tax say it also would kill memorabilia sales in Minnesota by causing higher prices that would drive buyers to shop online. And it could expand the black market of counterfeit jerseys and clothing that aren’t licensed by leagues or teams, they said.

Ray Crump Sr., a veteran sports merchandiser whose downtown Minneapolis shop is a long kickoff away from the Metrodome, said tax revenue would fluctuate with the fortunes of the teams.

Even good years are no guarantee, he said, because there are far fewer memorabilia shops to tax than there used to be.

“I don’t care if [the Vikings] go to the Super Bowl, they’re not going to take in that kind of money,” Crump said.

source

MNVIKINGSBLOG.COM ANALYSIS:

Everyone knows that the Vikings need a new stadium.  It’s unfortunate that the Wild and Twins who have new stadiums are now pouting at the opportunity to help their brother out.  The Vikings were asked to step aside when discussing the Twins stadium.  It’s too bad that this has to be an issue.  The state has been adamant about state money being used and the Vikings are looking at all options available.  I personally am still a fan of racino.  Regardless let’s get a deal done! SKOL VIKES!

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