by James A. Bacon
I’ll join Peter and Don (see the two previous posts) in expressing my displeasure with the McDonnell administration’s decision to approve a $4 million grant to support the retention of the Washington Redskins football team headquarters in Loudoun County. Frankly, I’m sick and tired of pro sport teams holding up state and local governments for ransom. Let Maryland or D.C. spend their tax dollars to rent a franchise that undoubtedly will turn around in a few more years to extract another round of tax dollars or take their business elsewhere.
The justification offered by the McDonnell administration in a prepared statement is that the headquarters employs 350 and generates $2.2 million and state and local tax revenue, not including the corporate income tax paid by the team. The headquarters also is visited by 20,000 individuals a year who spend approximately $3.4 million on goods and services, economic activity that also generates tax revenue.
In theory, the expenditure of $4 million in state dollars plus $2 million from Loudoun County and $400,000 from the City of Richmond to help set up a training camp there will be more than recouped by the tax revenue paid by the Redskins.
Yes, it would be a shame to lose those tax revenues. But I have to question how hard the McDonnell team bargained.
According to Forbes magazine, Redskins corporate profit amounted to $104 million in 2010. Assuming that the full amount is taxable, the Skins would pay roughly $6.2 million a year to Virginia at its 6% tax rate. But the Skins would pay $8.6 million in income taxes if they moved to Maryland and $10.4 million if they moved to the District.
Thus, the Skins already enjoy a benefit of $2 million to $4 million a year by virtue of the fact that they’re located in Virginia. You see, the Old Dominion works hard to keep its tax rates low so it can attract and retain business. If offends me that the Redskins enjoy our lower tax rate and come back for a double dip. Submitting to that kind of corporate extortion sets only encourages other companies to do the same.
What would happen if we told the Skins to take a hike? Would D.C. or Maryland offer a sweeter deal? Perhaps. But it would have to be really sweet to offset $2 million to $4 million less in income taxes every single year!
There’s more to the Redskins’ corporate-location decision than the corporate income tax rate, of course. The organization also has to consider the personal income tax. Virginia has a lower personal income tax rate, too, which benefits employees. I expect that the vast majority of employees at the Skins headquarters reside in Virginia. And I’m betting that most would be less than enthusiastic about being forced to either (a) commute longer distances or (b) move to a jurisdiction with higher taxes.
Finally, there’s the cost of real estate. I don’t know how much commercial real estate costs in Loudoun County compared to the cost in suburban Maryland, but I’m pretty darned sure it’s cheaper than in D.C.
The Redskins have a mediocre record these days when it comes to playing football, but it looks like they out-hustled the McDonnell administration on this one.