Hartmann: Cardinals Lose Their Way Chasing COVID-19 Tax Credits

May 4, 2020 at 6:20 am
The seventh most valuable team in Major League Baseball probably doesn't need a CARES Act tax credit.
The seventh most valuable team in Major League Baseball probably doesn't need a CARES Act tax credit. DOYLE MURPHY

The St. Louis Cardinals certainly are fortunate not to be confused with the Los Angeles Lakers.

The Lakers were publicly hammered last week for receiving a forgivable $4.6 million loan from the federal CARES Act, the national coronavirus economic relief plan enacted by Congress. It came from the Payroll Protection Plan, the object of public outrage when it became known that big guys like the Lakers — and they were hardly alone — were getting taxpayer handouts at the expense of the nation’s small businesses, for whom the program had quickly run out of funds.

The Lakers were perp walked by the national media even as they returned the money, supposedly upon learning that PPP funds had run dry. Their limp explanation that “we repaid the loan so that financial support would be directed to those most in need” was accepted by no one.

Even Treasury Secretary Steve Mnuchin went full Bernie Sanders on the Lakers: "I'm a big fan of the team, but I'm not a fan of the fact that they took a $4.6 million loan," he said on CNBC. "I think that's outrageous, and I'm glad they returned it, or they would have had liability."

If Mnuchin thinks you’re too greedy, well, I won’t even bother with an analogy.

What’s all this have to do with the Cardinals? Well, it turns out that our beloved baseball team has also discovered a way to help itself to a share of the very same federal CARES COVID-19 relief dollars, but under a separate tax credit provision established for companies that don’t qualify for the PPP.

The tax credits portion of the CARES act has flown under the radar. Under it, a qualified company can receive taxpayer dollars indirectly through a reduction of its employer-match share of social security (FICA) payments. A company gets forgiven up to $5,000 per employee in taxes it would normally have owed, in exchange for maintaining a certain level of its workforce.

The Cardinals provided the RFT with a communication sent to key personnel that referenced the need to shut down operations because “as a result of doing so, we believe that we may be able to utilize the employee retention tax credit available under the new CARES Act to help us retain our full-time employees during this suspension of operations.”

It appears the team had to shuffle some employee hours — for people they apparently planned to pay in any case — to get a piece of the emergency pie. The Cardinals didn’t respond to our follow-up questions as to the amount of the tax credits, but their website lists roughly 280 non-players. Back-of-the-napkin math suggests the team will rake in substantially more than $1 million in CARES tax savings.

The Cardinals have been happy to discuss parts of their private finances publicly with the St. Louis Post-Dispatch, which reported they are paying employees through the end of May (as are 28 of the other 29 MLB teams, a fact not noted in the story). They didn’t mention seeking help from the CARES Act for that purpose.

More significantly, the Cardinals volunteered that they hadn’t qualified for PPP funds and wouldn’t apply for them. They took pains to leave the distinct impression that this was no Lakers situation.

Well, that’s cool, but only if one accepts a distinction without a difference. Whether a company receives handouts through the PPP program or by having its FICA obligations forgiven through tax credits, it is still receiving the same, precious federal taxpayer dollars from an emergency COVID-19 program certain to run out of money for the people who desperately need it.

And as the Lakers discovered the hard way, just about everyone — even the Mnuchins of the world — would agree that Congress didn’t intend for the CARES program to benefit tycoons who own lavish professional sports franchises. However beloved they might be, the Cardinals are one of those.

According to the annual Forbes “Business of Baseball” ranking released just a month ago, the Cardinals have a franchise value of $2.2 billion, seventh among Major League Baseball’s 30 teams. Forbes reports that the Cardinals enjoyed $72 million in earnings on $383 million in revenues in 2019.

The current ownership group headed by Cincinnati’s William DeWitt Jr. — arguably the best in the business at running a baseball team — purchased the Cardinals in 1995 from Anheuser-Busch for a reported $55 million (net of the sale of parking garages included in the deal). Based on Forbes’ estimates, that investment has increased 40-fold.

If you had been able to write a check for $10,000 for a share of the Cardinals in 1995, that little price of a low-end used car would be worth $400,000 today. Of if you prefer to think of it in real estate terms, an investment in the team of $160,000 — the average price of a house in 1995 — now represents a mansion worth $6.4 million.

As a capitalist, I’m fine with whatever rewards the Cardinals’ owners might have reaped from whatever risks they might have taken. But considering how crazy wealthy these people have become — not even counting the untold hundreds of millions in profits they’ve received over the years — for them even to consider taking advantage of COVID-19 emergency relief funds is repulsive.

This is not just a case of a company taking all the normal tax breaks to which it is entitled. Everyone has a right to do that. No one needs to tip the government. This is about a professional sports franchise actively pursuing tax breaks expressly meant for folks who are suffering.

This program is about providing life-saving personal protective equipment to our frontline health care and first-responder heroes, for COVID-19 tests and for all the funds needed to keep business dreams and suffering Americans alive. Literally.

That’s why the Lakers drew such scorn. And why it’s so unconscionable for the Cardinals to even consider taking a dime — directly or not — through CARES.

In case you couldn’t tell, I’m not all that impressed with this band of corporate socialists. They have been happy to collect more than $100 million in corporate welfare for their new stadium from city and county taxpayers after having been rejected in their late 1990s bid to extract a quarter of a billion dollars from Missouri taxpayers. And now there’s this.

And as a lifelong Cardinal fan — from decades before these barons arrived on the scene — let me remind you of this: The Cardinals date all the way back to 1900 as a civic jewel. Not all of its history has been great — its legacy of racism was downright ugly in the ’50s — but the team has prevailed as a treasure.

The current owners of the Cardinals — who have raised just two of the team’s eleven championship banners — didn’t create the magic we cherish in that sea of red, and for which we’re yearning right now. They just bought into it at the right time.

Their idea of the Cardinal Way is to horn in on the benefits of a COVID-19 relief program? I’d say they’ve disgraced themselves.

Pretty much like the folks who own the Los Angeles Lakers.

Ray Hartmann founded the Riverfront Times in 1977. Contact him at [email protected] or catch him on St. Louis In the Know With Ray Hartmann from 9 to 11 p.m. Monday thru Friday on KTRS (550 AM).