A SHABBY PERFORMANCE
The tax man’s fingerprints are all over FedExForum. They’re on the seats, the concessions, the rental cars and limos that bring fans downtown, the restaurants where they eat, and the hotel rooms where they stay. One thing that isn’t taxed locally, however, is the players.
In the world of major-league sports, Memphis and Nashville are tax havens. Tennessee has no state income tax and no local payroll tax, although Memphis voters get a chance to change that by voting on a referendum next week.
In the unlikely event that an income tax ever passes in Tennessee or Memphis, the Memphis Grizzlies will write the biggest checks, because their players make millions every year in salary and endorsements. One $4 million player salary equals roughly 100 teacher salaries. The Grizzlies pay no income taxes to their home state and home town even though they play in a publicly funded arena and, like other professional athletes and entertainers, are taxed in most other places where they play.
But while the mainstream Memphis media have been quick to praise the Grizzlies for their civic activities and charitable donations and to trash the tax referendum for its vagueness, they have not put the two elements together in the same story. This is but one omission in what has been, overall, a shabby job by the media, politicians, and business leaders of explaining the issues underlying the payroll tax referendum.
If the vaguely worded referendum is defeated next week, as expected, no one will point out that enabling legislation is often vague, that Mayor Herenton took a pass, Mayor Wharton took a pass, and the business community raised more than $100,000 to fight the “well-intentioned” proposal. Proponents of the referendum had only city councilwoman Janet Hooks and free media. Payroll tax opponents will crow that “the people have spoken,” and the headlines across Tennessee will read “Memphis Overwhelmingly Rejects Payroll Tax.”
Better gloat now, because the chickens are coming home to roost in 2005. While the Good Ship Memphis steams along, there’s rough water ahead.
á On Monday, a story in The Wall Street Journal appeared under the headline “Rising Property Taxes Across U.S. Lead to a Slew of Ballot Initiatives.”
According to the article, “The efforts share a common theme: that reliance on property taxes, which have jumped 10 percent on average in the past few years, is an outdated and sometimes unfair way to fund local services.”
Every conscientious politician and business leader in Memphis and Shelby County knows as much, but none of them have stuck their necks out for the payroll tax. According to the Shelby County Assessor’s office, property taxes accounted for 50 percent of county revenue in 1996 and 63 percent today.
Memphis is 75 percent of Shelby County. For the first time in memory, the value of assessed property was down in Memphis last year by $90 million mainly due to reductions in the Hickory Hill area. As a result, Memphis lost $10 million in tax revenue.
á Next year is a reappraisal year for the first time since 2001. If you’re a Memphis homeowner and your $150,000 house is now worth $200,000, you’re looking at an increase in your property taxes of $908 in 2005 before the Memphis City Council and Shelby County Commission, properly chastened by defeat of the payroll tax, probably raise the property tax rate even more.
á Memphis and Shelby County are buying growth by constructing the most expensive public building project in local history, FedExForum, and by subsidizing growth through the Center City Commission, Industrial Development Board, and Health and Education Board, which grant tax freezes. Every project taken off the tax rolls or not put back on the tax rolls when its freeze expires puts a greater burden on the property tax. At least some of the revenue streams diverted to FedExForum would have gone elsewhere. Suffice it to say that a $250 million arena cannot pay for itself, and it is not free.
á If these numbers have not put you to sleep yet, visit the Web site of the Federation of Tax Administrators (taxadmin.org) for a look at how Tennessee taxation, based largely on sales and property taxes, stacks up against other states. Or Google the phrase “jock tax” for an interesting look at how other cities in Canada and the United States capture tax revenue from professional athletes. But don’t expect to find much from the mainstream Memphis media, which is still starstruck when it comes to pro sports.
I don’t know anyone on the Memphis Grizzlies team or staff. I assume that on an individual basis they are as generous and civic-minded as the rest of us. Generosity and major-league sports are nice, but so is tax equity. On that score, Memphis is bush league.
