The Effect of Luxury Taxes on Competitive Balance, Club Profits, and Social Welfare in Sports Leagues

Helmut Dietl, Markus Lang and Stephan Werner ()
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Stephan Werner: University of Zurich

International Journal of Sport Finance, 2010, vol. 5, issue 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.

Keywords: sports league; luxury tax; social welfare; competitive balance (search for similar items in EconPapers)
JEL-codes: L83 (search for similar items in EconPapers)
Date: 2010
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Related works:
Working Paper: The Effect of Luxury Taxes on Competitive Balance, Club Profits, and Social Welfare in Sports Leagues (2009)
Working Paper: The Effect of Luxury Taxes on Competitive Balance, Club Profits, and Social Welfare in Sports Leagues (2009)
Working Paper: The Effect of Luxury Taxes on Competitive Balance, Club Profits, and Social Welfare in Sports Leagues (2009)
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International Journal of Sport Finance is currently edited by Arne Feddersen, Babatunde Buraimo, Joachim Prinz and Jane Ruseski

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