Owners Playing it Safe: A Law and Economics Explanation of Why Sports Franchises Relocate

Abstract

(10 Willamette Sports L.J., no. 1, 2012, at 1). This article analyzes how state and local taxes can drive a franchise’s decision to relocate. First, the article analyzes the benefits a sports franchise provides that will be lost if a team relocates. Next, the article uses an example to illustrate how unfavorable state and local taxes can influence relocation decision-making by risk-averse team owners, provides empirical evidence from recent relocation cases, and describes how state and local taxes affect the everyday operation of a sports franchise. The article concludes by proposing a revenue-neutral income tax carve-out that corrects the distortionary effect of state and local taxes on sports franchises and allows high-tax cities to keep their teams in an effective and fair manner.