The Win Tax: A real incentive to improve teams in Cleveland or just pre-election political grandstanding?

Mike Ehrmann

¿Por qué no los dos?

Ed FitzGerald, Cuyahoga County executive and the Democratic nominee for governor, made headlines on both the local and national level last week after proposing a plan he coined as the "win tax."

And headlines are probably exactly what FitzGerald wanted.

The proposal sparked even more discussion among the Cleveland fans and media all throughout Ohio. Is the plan a realistic way to offer incentive for the owners to improve their respective teams or is this merely political grandstanding in an attempt to appeal to the masses prior to an upcoming election?

Why not both?

First and foremost, despite FitzGerald's public denials suggesting otherwise, it's fairly obvious that the ongoing gubernatorial race has played a role here in the decisions to push forward with the "win tax" proposal. You don't hold a half-hour press conference outlining an overhaul of at least one fifth of a tax that the area spent the first four months of the year debating without the hope of making some headlines.

That's actually understandable. Any major proposal that's worth considering is equally as worth informing people of. Press conferences are one way of doing that.

The timing was no accident either. FitzGerald wasn't nearly as outspoken on either side of the heated sin tax debate prior to its eventual victory at the polls in May, outside of just a "supportive quote" in a press release from back in February, as noted by Cleveland.com.

And now, a quick google search of "win tax" illustrates how you can't read a story on the plan without hearing about FitzGerald. It is his proposal after all, but the resulting additional publicity for this gubernatorial candidate is undeniable.

But if there's a good idea at the core of a political grandstand, why throw the baby out with the bath water? This philosophy begs another question, however: Is it a good idea in the first place?

The answer is a matter of opinion, but it's one you should hold entirely independently of how you feel about the existing sin tax. The debate over the latter is already effectively over. The sin tax renewal passed and that money will be allocated regardless of the new win tax proposal.

The win tax plan itself doesn't ask for any additional money, rather it's dealing with how to distribute among the three major sports facilities in Cleveland (FirstEnergy Stadium, Quicken Loans Arena, and Progressive Field) a certain portion of the money that's already there and guaranteed to go to maintaining those venues from the sin tax.

It's also worth noting, the venues are publicly owned and leased to the respective teams. It's written in those team-friendly leases that the public (city and/or county) is obligated to foot the bill on major capital repairs of the venues.

How does this 'win tax' work exactly?

According to the plan FitzGerald's outlined, the proposed "win tax" would take 20% of the sin tax revenue annually and distribute it among the three teams' respective venues based on performance each year. That 20% figure is estimated to be roughly $50 million over the 20-year span of the sin tax renewal, and over $2.5 million annually.

The plan has the county executive appoint a "fan advisory commission," which has to be confirmed by city council. The commission would then determine an objective method of distributing this incentive-laden 20% based on how each of the three teams performed in their respective sport that season.

Think of it like this: In the proposal, 80% of the sin tax distribution isn't changing very much from how it works now, other than requests being more transparent. If you view that 80% as the new base, the win tax reserves what now could be considered an extra portion and ties it to performance for which ever team has earned it. Meanwhile, it's all still money that's already guaranteed via the sin tax renewal.

Consider this entirely hypothetical example: In a given year, the Browns finish 8-8, but miss the playoffs. The Cavs finish with an unfortunate sub .300 record and are back in the lottery. The Indians win the AL Central and the division series, but lose in the ALCS. The committee could objectively determine that the Indians earned the most of the reserved win tax money, so they'd jump to the front of the line for requests of this performance-tied 20%. But the Browns deserve a portion as well, their requests are in second behind the Tribe that year. In this scenario, the Cavs' requests would come in last.

If the poorer-performing teams want a larger portion of this reserved 20% win tax bonus, they have to improve their performance. Perhaps the chance at being in the front of the line for this money encourages the Cavs to go back into luxury tax range, or the Indians to pursue a big-ticket free agent. Or maybe the Browns get rewarded if they finally turn it around. The potential for incentive is obvious, even though the money is still reserved only for capital improvements on the venues.

But the plan is not without the possibility for problems.

"Fan advisory commission" is too vague. In fact, the word "fan" should be dropped from the advisory commission entirely. Not only does that show the clear populist spin to this proposal, but even if taken literally, it's a bad idea.

We all love Cleveland fans. Most of us are Cleveland fans. But our familiarity also means we should then know why it's such a bad idea to have them making these vital decisions on this $50 million.

If we instead call it simply a "competition advisory commission" and make it panel of well-informed experts on each of these sports and venues, they'll be better suited to make the decisions regarding objective distribution of this performance-tied money.

If that change can be made and that panel of experts can be realistically specified, the plan is suddenly a very reasonable idea. It's not that important that we originally heard about the idea only because a nominee for governor might have been pandering to sports fans.

In closing, the most prominent positive of the new "win tax" discussion is the fact that it has indeed sparked more discourse among the community, and especially with sports fans who are otherwise not at all interested in political issues.

FitzGerald himself made it a point to stress that his proposal a week ago was merely the start of a conversation.

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