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The effect of luxury taxes on competitive balance, club profits, and social welfare in sports leagues


Dietl, H; Lang, M; Werner, S (2010). The effect of luxury taxes on competitive balance, club profits, and social welfare in sports leagues. International Journal of Sport Finance, 5(1):41-51.

Abstract

This paper presents a model of a professional sports league and analyzes the effect of luxury taxes on competitive balance, club profits, and social welfare. It shows that a luxury tax increases aggregate salary payments in the league and produces a more balanced league. Moreover, a higher tax rate increases the profits of large-market clubs, whereas the profits of small-market clubs only increase if the tax rate is not set inadequately high. Finally, we show that social welfare increases with a luxury tax.

Abstract

This paper presents a model of a professional sports league and analyzes the effect of luxury taxes on competitive balance, club profits, and social welfare. It shows that a luxury tax increases aggregate salary payments in the league and produces a more balanced league. Moreover, a higher tax rate increases the profits of large-market clubs, whereas the profits of small-market clubs only increase if the tax rate is not set inadequately high. Finally, we show that social welfare increases with a luxury tax.

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4 citations in Web of Science®
4 citations in Scopus®
11 citations in Microsoft Academic
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111 downloads since deposited on 08 Jun 2010
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Language:English
Date:February 2010
Deposited On:08 Jun 2010 15:09
Last Modified:17 Feb 2018 17:07
Publisher:Morgantown, WV : Fitness Information Technology
ISSN:1558-6235
OA Status:Green
Related URLs:http://ssrn.com/abstract=1237737

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