The Washington PostDemocracy Dies in Darkness

Study: Blue-state politicians are undermining their home-state sports teams

Oklahoma City Thunder forward Kyle Singler dunks in a game against the Minnesota Timberwolves on April 11 at Target Center in Minneapolis. Recent research shows that teams in states with high taxes, such as Minnesota, tend to do worse than those in states with relatively low taxes, such as Oklahoma. (Jesse Johnson-USA TODAY Sports)
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Going to college in Minnesota, economist Erik Hembre got acquainted with griping among local sports fans. Ever since the Minnesota Twins won the World Series in 1991, the state's teams have been, for the most part, mediocre — and at times downright awful.

But while Americans everywhere have excuses they lean on when their teams lose, Hembre wondered whether disgruntled Minnesotans' favorite argument actually had some merit to it.

Minnesota's state income tax is among the highest in the country. As a result, teams in Minnesota might have to make more lucrative offers to recruit athletes, who would otherwise be better off financially if they played in a state where they would pay less in taxes. Other things being equal, the maximum marginal rate of 9.85 percent could force the state's franchises to pay that much more for the same talent.

"You get a lot of complaining about professional sports in Minnesota, because this problem is especially acute there," Hembre said. "People complain about, 'Oh, we can’t get good free agents. It really hurts us.'"

The situation in Minnesota fits a broader pattern that Hembre described in a draft of a paper he published online this month. Teams in blue states, which tend to have higher income taxes, seem to have performed worse over the past two decades than teams in red states with low or no income tax, after accounting for other local factors that can affect a team's performance.

Hembre found that, among teams that are similar in the age of the franchise and in terms of the cities in which they play, those in the states with the lowest income taxes have had winning percentages that are 3 percentage points higher than those in the states with the highest taxes since 1994.

Hembre, now at the University of Illinois at Chicago, examined the record of each team in the National Basketball Association, the National Football League, the National Hockey League and Major League Baseball. Hembre acknowledges that his analysis has limitations, but he did adjust for local populations, incomes and other factors that can help a team win.

For example, teams in large or wealthy cities can sell more tickets and advertising, which gives them more money with which to pay players —  a major advantage in leagues that don't impose hard caps on how much they can spend on salary. New teams are also at a disadvantage, since assembling a winning roster takes several years.

Going back to 1977, Hembre also found that income tax was not associated with teams' records before the 1990s. During that period, strikes and collective bargaining resulted in players having more power to negotiate their salaries with their employers, and the rapid increase in professional athletes' pay that has followed could make local income taxes more of a concern for teams.

Hembre also studied college games. Because college athletes are unpaid, income tax should not affect how well their teams do. Indeed, college teams in the same states performed no better than college teams in high-tax states, Hembre found.

Hembre recommended that leagues consider limiting teams' payrolls based on the players' estimated income after taxes, rather than before. It would be a simple way of ensuring that teams in states with stiff taxes can spend more to compete on an equal footing with those in states with no income taxes at all.

Based on Hembre's informal analysis, it is difficult to say whether the advantage for teams in states with low taxes is a result of the fact that those teams can recruit better players for effectively the same price, or if there is something else about those states that explains why teams do better there.

Also, not all sports exhibited the same relationship between taxes and teams' performance. In baseball, teams' records were the least correlated with their states' tax rates, compared with the other leagues Hembre examined.

Hembre found that baseball teams in high-tax states lost just 1.6 additional games per year, compared with similar baseball teams in low-tax states. In a season of 162 games, that is a difference of only about 0.010 in a team's winning percentage.

That could be because there is no limit on the salaries teams can pay their players in professional baseball. As a result, baseball franchises might be able to pay more to attract players to high-tax states than can other teams.

In 2015, for example, the Los Angeles Dodgers' payroll was more than quadruple that of the Florida Marlins. The fact that California has the steepest income tax in the country and Florida imposes no income tax probably would not make much difference for a player choosing between those two teams.

Of course, for many politicians, reducing taxes is not just about sports. Conservative policymakers in particular often argue that reduced taxes help states' economies overall by attracting businesses and workers.

Hembre draws the opposite conclusion from his research. State income taxes are modest enough that businesses can compensate workers for them, as baseball teams do. It is only when employers' payrolls are constrained —  such as by salary caps in other big-league sports —  that income tax becomes a real problem, but that is not an issue for most ordinary companies.

"For the most part, state officials should take [the data] as evidence that income-tax rates don’t hurt their labor markets in general," Hembre said. "What you see is that income taxes really hurt when a business isn’t able to directly compensate their workers for that extra income tax."

By contrast, the correlation between taxes and teams' performance was clearest in the NBA.

Basketball teams in low-tax states win 4.5 more games a year than comparable teams in high-tax states. Statistically, it is as though teams in low-tax states were all playing with the equivalent of an elite player such as Draymond Green on the roster.

That is no surprise, he said. Green would cost a typical team roughly 10 percent of its budget, and the difference in the rate between the states with the highest taxes and the lowest taxes is about 10 percent.