Owning a sports-team is a plute’s get-out-of-tax-free card
When Microsoft CEO (and Linux archnemesis) Steve Ballmer retired and bought the LA Clippers, it was easy to assume that the billionaire was engaged in a jolly, buying a major league sports team as a folly.
But far from it: Ballmer made his bones (and his billions) by cheating — lying about free software; secretly funding absurd, crippling, pretextual lawsuits over GNU/Linux; and leading a vast, corrupt monopoly — and his foray into sports ownership was no different.
As Robert Faturechi, Justin Elliott and Ellis Simani document in yet another blockbuster Propublica Secret IRS Files story, buying the LA Clippers allowed Ballmer to evade $140m in taxes from the sale of Microsoft stock.
Sports teams, it turns out, are not merely billionaires’ playthings — they’re also a way to launder the earnings of the ultra-rich to reduce their tax liabilities far below the liabilities owed by the minimum wage workers serving pretzels or the millionaire players.
Ballmer’s tax dodge involved ginning up $700m in paper losses for the team by amortizing its assets, including assets that don’t depreciate. It’s part of an old dodge in sports-team ownership, perfected by Cleveland Indians/Chicago White Sox owner Bill Veeck in the 1940s.
Veeck didn’t think that wealthy sports team owners should pay any tax (“Look, we play the Star Spangled Banner before every game. You want us to pay income taxes too?”) and conceived of a “gimmick” (his word) to make this a reality.
In addition to taking a deduction for his players’ salaries, he insisted that he could depreciate the value of his players’ salaries, by acquiring the team and its contracts in two separate transactions. It worked.
As former MLB president Paul Beeston wrote, “Under generally accepted accounting principles, I could turn a $4 million profit into a $2 million loss and I could get every national accounting firm to agree with me.”