Real Life Intrudes: GOP’s tax bill may cripple athletic departments

As of this writing, the Senate and House have both passed a massive (and massively unpopular) tax cut, the “Taxes and Jobs Act” of 2017, styled by the bill’s sponsor’s as tax reform. The bill will almost certainly land on Trump’s desk by sometime today — if it hasn’t by the time we go to press.

The measure adds a staggering $1 trillion to $1.5 trillion dollars to the deficit over 10 years...even assuming it pays for itself, which no economist (or even the bill’s cheerleaders) believes. So, the Treasury is left with a gaping maw that can’t be filled just by eliminating discretionary spending. The question of what to slash/burden so as to get at least a trillion dollars arises, but the targets have been familiar.

One bullseye painted by the bill has been charitable giving, in particular non-religious non-profits and higher education. While graduate students have, for now, escaped a 400% increase in taxes upon scholarships and assistantships, other areas of the academe have not been so fortunate. The impact will be immediate and painful, and perhaps nowhere will it be felt as profoundly as it will be in college athletics, including Tide Pride and the Alabama football program.

The first major change is the elimination of the charitable contribution deduction. As you Tide Pride donors know, a significant portion of that contribution was deductible. Those donations are used to fund non-revenue programs, including Title IX programs. But they’re now uncertain, to say the least; and a great many are in jeopardy.

Said, Greg Byrne:

“We’re very concerned about it.” Alabama Athletic Director Greg Byrne said Tuesday. “On two fronts: one, the donations people make and through Tide Pride that can write off part of their ticket cost have allowed us to fund 21 programs, to obviously support our football program in the manner that we do, to go out and compete for championships, it’s allowed us, from the opportunity standpoint, for thousands upon thousands upon thousands of young women nationally where we can provide great opportunities for young women to go to school on scholarships academically,” Byrne said, in a reference to Title IX.”

Obviously, a loss of revenue means that there will be lost opportunities for scores of men and women. As Title IX requires parity in number of programs, a blow to one is a blow to all. And the loss of the deduction goes well beyond Joe Ticketholder’s decision to donate to Tide Pride. In Alabama’s case, Tide Pride and its big money donors generate a significant portion of total athletic department revenue -- about $25 million yearly of Alabama’s $103 million in revenue.

Then there is another, perhaps more onerous, provision: the taxation of non-profit employees earning over $1 million per year. Ostensibly meant to punish political enemies / NGOs, the bill has the unintended (or not so unintended) consequence of also hammering big-money coaches at state universities.

From USA Today:

Major-college athletics programs are facing significant increases in the cost of already highly paid coaches and administrators due a tax that will be imposed on the compensation of all non-profit organizations’ most highly paid employees. For example, as currently constructed, Alabama’s contract with football coach Nick Saban likely will cost the university at least $1.2 million in addition to the $7.125 million in basic compensation he is scheduled to be paid if remains the Crimson Tide’s coach throughout the 2018 calendar year.

In most states, the football coach is the highest paid state employee, however it certainly targets academic deans and university administrators and a few basketball coaches if you live in a weird place. You can’t imagine that tacking on an additional $12 million dollars was what Texas A&M had in mind when it signed Jimbo Fisher to the most lucrative CFB contract in history. Nor, you have to believe, was it Rep. Jim Jordan’s plan to jack Urban Meyer: The Buckeyes aren’t the ACLU. But, here now is the landscape.

The salary tax provision poses an additional but-related problem beyond the merely economic; it will absolutely affect competition: College football, already the most gentrified sport outside of women’s basketball, is dominated by two dozen “haves,” with everyone else trying in vain to stay competitive in this era of orgiastic spending. But, by adding millions of additional dollars in unexpected taxes, only the very wealthiest programs will be able to compete in this landscape. Salaries may not contract; they almost never do. But, the burden and damaged bottom lines will almost-certainly put an end to the coaching salary bubble: most schools will not be able to sustain the loss; and the losses here from athletic departments are simply mind-boggling.

Overall for schools, “this is going to cost hundreds of millions of dollars a year,” said Tom McMillen, a former congressman who is now president and CEO of the LEAD1 Association, which represents athletics directors at schools in the NCAA’s top-level Football Bowl Subdivision. “It’s literally half a College Football Playoff (worth of money). When you put it at that kind of magnitude, it wakes you up a little bit.”

Where this all takes college athletics may be uncertain in scope, but is readily foreseeable in application. All that remains now is waiting to see how very many programs will be left standing when the gale passes. Even if public policy finds a sharp course reversal in, say, about 11 months, the impact will be generational and negative: from elimination of programs and scholarships and Title IX opportunities, to hiring decisions that set programs back or tread water, to loss of donations, to driving talented persons out of non-profits and into the private sector, changes are coming to a campus near you...and none of them will be good for students or the sports they play.