It's Time to Tax College Sports

Via the Economist's Free Exchange Blog, Kathryn Jean Lopez seems surprised that the Senate Finance committee is considering taxing college sports -- or, more specifically, considering changing the tax status of some college sports programs.

But look, this makes perfect sense. Colleges and Universities get tax exempt status because they are thought to be providing a valuable educational service. And they probably are. But many of those universities are operating athletic programs that are giant, commercial cash cows. The Congressional Budget Office (pdf) says that between 60 and 80 percent of Division IA athletic department activity can be described as commercial. And while pulling in dollars hand over fist might have some educational value, I doubt it's what Congress had in mind.

football flickr user rdesai.png

Actually, colleges and universities have it twice as nice. Not only do they get tax exempt status, but charitable donations to the schools are tax deductible. In other words, schools can not only operate tax-exempt business enterprises; but the government will subsidize them to do it.

I've said all this before, but the easy solution here is to change the deduction rules governing charitable donations. Those rules are regressive. But, just as importantly, they don't benefit the common good in a narrow, serious way. As it stands you can claim the same charitable deduction for giving $10,000 to an orphanage as you can for giving $10,000 to your alma mater's athletic program in exchange for season tickets. Does anyone think that makes sense?

Image from Flickr user rdesai