Fiscal cliff deal gives NHMS big bucks
But the general manager of the New Hampshire Motor Speedway says the tax benefit has promoted economic development in the Granite State and is being used as intended.
"I can't speak for all the tax breaks that got included with that bundle," said Jerry Gappens, executive vice president of NHMS, referring to the controversy surrounding loopholes that benefit Puerto Rican rum makers, Hollywood movie producers and Wall Street bankers. "But I know in our case, it's stimulating economic growth through reinvestment in our facilities, which gets more fans here and increases jobs."
Knowing the fiscal cliff compromise was likely to pass, lawmakers tacked on several so-called "tax extenders," mixing popular benefits like a deduction for teachers who buy classroom supplies, with tax incentives for film productions and railroad track maintenance. The move drew criticism from both liberal and conservative quarters.
"It's hard to think of anything that could feed the cynicism of the American people more than larding up must-pass emergency legislation with giveaways to special interests and campaign contributors," Sen. John McCain, R-Ariz., said in a statement after the bill was approved.
The nonpartisan Committee for a Responsible Federal Budget said the "tax extenders" were ill-advised because their cost is not offset, setting a bad precedent for future extensions.
"As Congress struggles with the debt ceiling, there will be issues that may be in a gray area when it comes to tax subsidies," said Phineas Baxandall, senior analyst for tax and budget policy with the U.S. Public Interest Research Group office in Boston. "But NASCAR doesn't seem like a gray area. This just seems like a special-interest handout."
The tax break for "motor sport entertainment complexes" was first approved in 2003, and has been extended by Congress every year since. It allows the owners of NASCAR racetracks to depreciate the investment in new facilities over seven years instead of 15 to 39 years, thus allowing for a much larger deduction and lower tax bills in the years immediately following the initial capital investment.
The measure has saved the Loudon race track thousands of dollars in tax payments. Gappens says the incentive has been put to good use in ways that benefited racing fans, the town of Loudon and the state as a whole. He couldn't comment on how the deduction was used before 2008, when Speedway Motor Sports, based in Charlotte, N.C., bought the speedway for $340 million, but since then, he said, owners have invested $20 million in improvements.
An economic boost?
Some of the investments encouraged by the tax savings included a $1 million bathroom and shower house for camping guests at the speedway; a $1 million video scoreboard; a $1.2 million building to house ambulance services; and $6.5 million in work on the infield to improve drainage so the area could be used for events. Trams were added to transport fans from parking areas to the stadium.
Gappens also points out that the speedway has doubled employment since 2008, from 17 to 38 full-time jobs, with more hiring when the race season is under way.
Supporters say the accelerated depreciation gives NASCAR a level playing field in the entertainment business, where ball parks and football stadiums are often funded at least in part by taxpayer dollars. Other entertainment venues, like amusement parks, are on a seven-year depreciation schedule for capital investments, they point out.
"It's doing what it was meant to do, encouraging investment," said Gappens. "Off the top of my head, I can't think of too many New Hampshire companies that have invested as much in their businesses in the past four years and have doubled their employment. This tax break helps stimulate that."
As the value of the speedway has increased, its property tax bill has gone up from $600,000 in 2008 and $900,000 in the last tax year, and that doesn't take into account what Gappens called the "trickle-down benefit" for the state, which relies heavily on NASCAR weekends for tourism dollars.
That may all be true, said Baxandall, but he doubts those arguments would carry the day if the tax break had to stand on its own, given the estimated $75 million a year hit to the national treasury.
"Often these kinds of subsidies pass because the special interests behind them are politically powerful and because there is little public attention to them," he said. "If this was a direct appropriation to give money to NASCAR as a budget item, it would get a lot of attention, so it's done through the back door of the tax system."