WHEN Australia’s Olympic team entered the stadium in Rio in Saturday’s Opening Ceremony, it was a moment of intense national pride. But for me that pride is mixed in with thinking about all the money we spent getting them there.
Australia spends a huge amount on elite Olympic sports. The Australian Sports Commission gets $250 million from the government to spend each year — over $100 million goes to elite athletes. State Institutes of Sport also spend up big.
The Australian Olympic team — smiling bundles of muscle in very smart jackets — is a project we have worked on for years. The athletes — and all the ones they beat to get there — represent billions of dollars of investment. Another way to look at it? That’s a lot of hospital elective surgery waiting lists walking round the track out there.
I know that feeling – when some swimmer got silver the other day I remarked to Mrs D and number 2 son that we’d just witnessed several million dollars going down the toilet. Apparently that’s not the appropriate attitude; one should happy that an Australian did so well, but disappointed she didn’t win gold. I was thinking of the foregone tax cuts.
So here is one argument why the government should finance sports:
I love sport, and I really love watching Australians win. … Australians love watching Australians winning Olympic medals.
One of my RMIT colleagues – a sports economist – points to this positive externality suggesting that the joy that Australian sporting victories gives ordinary Australians is something that should be paid for, and it is paid for, by the government on our behalf. Needless to say I am underwhelmed by this argument and have told him so. For those of us who loathe track and field event sports the Olympics could very easily be a negative externality. In any event the presence of an externality is a necessary but not sufficient condition for government intervention. There is no reason to believe that the joy of watching Australians win medals can’t be captured and sold on the open through things such as – oh, I don’t know – “ticket sales” and “advertising”. No reason at all for government funding too.
But that isn’t the story we normally hear – we then hear a story about how sports people should pay HECS.
We make police, nurses and teachers pay back their education and training. Why not athletes?
HECS kicks in at $54,869 and you repay til your debt is gone. An equivalent scheme for elite sports would probably have to work differently (especially since some athletes have HECS debts too.)
It might be best, for example, to take 1 per cent of after tax earnings per year spent at the Australian Institute of Sport, when they earn more than $100,000 a year. That could go up to a maximum of 10 per cent if they spent 10 years at the academy.
Successful athletes would not have their payments limited. In this sense it would not be exactly like HECS. They would effectively pay back their own costs, plus a share for all their teammates that turned out not to be so lucky (or talented).
I have mixed feelings about this. First thing is that HECS is a fixed fee. Students pay back the (partial) cost of the education they received. There is no reason why the Institute of Sport couldn’t or shouldn’t work the same way.
Taking a percentage of sports star earnings over some threshold is something that Australia already does – it’s called progressive income tax. Taxing the successful to subsidise the unsuccessful is something we already do too – it’s called the welfare state.
So I can see an argument for HECS for PECS – but I would leave it as HECS and not some tax levy or additional tax on sportspeople. Ideally, of course, the Institute of Sport would be shut down in total, or privatised, and taxes cut.