Rep. Drew Stokesbary of Auburn is the House Minority Floor Leader and ranking member on the House Appropriations Committee. Since his election to the House in 2014, Stokesbary has set his sights on a variety of issues, from tax reform to traffic congestion to college affordability.
Most recently, Stokesbary has been in the news due to his bill that would permit NCAA athletes enrolled at Washington colleges to receive compensation. The bill stalled in the legislature last session, but the NCAA Board of Governors voted last week to allow student-athletes to profit from the use of their name, image, and likeness — a move Stokesbary believes will embolden his legislation.
Below is part one of a discussion I had with Stokesbary about the NCAA Board Of Governors vote, why this issue is a legislative priority for him, and a counter proposal of which he is not a fan.
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Michael Goldberg: Among the principles and guidelines that the NCAA board of governors has said should be modernized include a directive to “make clear that compensation for athletics performance or participation is impermissible.” Can you explain what the distinction is between profiting off performance and of one’s name, image, and likeness, and can you explain why the NCAA feels it important to make that distinction?
Rep. Drew Stokesbary: Income from your name, image, and likeness is what we think of as endorsements. When we hear that Lebron James or Tiger Woods has a multimillion dollar contract with Nike, most of that money is not really in exchange for Lebron James or Tiger Woods providing services for Nike. In general, most of the value in the contract is for Nike’s ability to use the athlete’s name to advertise its own products. Nike’s profits are net positive because they presumably sell more shoes than what they have to pay Lebron James for his name, image, and likeness. And Lebron James gets to leverage the fact that he already has this existing celebrity. That is the kind of thing the NCAA has said[in their recent decision] they’re going to allow.
The other areas that would remain impermissible are things like compensation for performance. For example, if a college basketball player wanted to go play in Europe during the off-season, maybe the European league would be willing to pay him a half million dollars per year, the NCAA still doesn’t want that to happen.
MG: I want to ask you about the concerns some people have that these changes have the potential to induce imbalances in the flow of talent across the NCAA. The argument is that there are certain markets that will be much better suited to capitalize on the newfound ability of student athletes to profit off their name, image, and likeness. From a legislative standpoint, do you think there need to be countermeasures in place to ensure talent is fairly distributed across markets, or do you think this shouldn’t be an issue the NCAA concerns itself with?
DS: It’s not that it’s not a concern, it’s just that any potential solutions to the concern are going to make college athletics far worse. The solutions are going to cause more problems than they’re going to solve.
First of all, this idea that there are certain markets or certain cities that allow athletes to better capitalize on their name, that’s true whether you’re talking about college sports or professional sports. You often see free agents in the NBA or MLB being more drawn to the opportunity to play in a market like New York or Los Angeles and it being comparatively harder for a market like Seattle or Minnesota to sign these big names. Yet somehow, the smaller markets in professional leagues still find plenty of big names. Sometimes they compensate for the difference because of team strategy or personalities, or a city might have other things to offer. Teams that aren’t in major markets like LA, and New York or Chicago have been figuring out ways to attract talent for decades and they’ve done pretty well.
Second of all, even when you have a scenario where all else equal athletes might still be more likely to want to play in New York or LA, while there’s been periods of Yankee dynasties and Laker dynasties, there’s been just as many extended periods of dynasties in smaller markets. Just look at the teams who just competed in the World Series, both mid-market teams. So the idea that athletes will only go to the biggest markets and you can only win if you have the biggest names — that’s just not true. There is a competitive imbalance everywhere, but that is just a function of the system we live in, it’s not a function of whether or not athletes get paid. It is a system where there are slights correlations and slight trends, it’s not an absolute system. I don’t believe for one second that UW or WSU would never be able to get a five star recruit again, because you don’t see that happening with the Mariners or Seahawks. You see plenty of mid-markets teams competing for national titles in professional leagues.
MG: I’m going to ask you a question about Twitter because I’m certain it’s your favorite type of question. You replied to a tweet by Senator Richard Burr of North Carolina, who says that if college athletes are going to make money off their likenesses while in school, he’ll be introducing legislation that subjects scholarships given to athletes who choose to “cash in” to income taxes. Help me and our readers understand, why should or from your perspective, why shouldn’t, the ability of student athletes to profit off their likeness necessitate a reclassification of scholarships as income?
DS: Right now, scholarships used for academic things like tuition, books, room and board, are exempt from income tax and it’s like that for all students whether you are on an athletic, merit, or financial aid based scholarship. It is a decision that Congress made decades ago for three reasons.
One was a recognition that our system involves trying to tax people based on their ability to pay, and scholarships are given in cash. Even if your tuition is $20,000 per year, you don’t actually have $20,000 pass through your bank account. So the idea that they would try to tax it — people are in college they might not have the ability to pay.
Second, sometimes tax policy tries to incentivize certain behavior, and I think everyone can agree that college is a good thing and as many people that can go to college, for whom it makes sense to go to college, probably should go to college. For that reason, scholarships have been exempt because you want to encourage that kind of behavior. Why would you make it harder for someone to go to college by taxing them.
The last reason is a little bit more nuanced and esoteric, but essentially, sometimes tax policy has to distinguish between labor capital and various things like that. When it comes to scholarships, tax policy had essentially said that these look more like investments for the long term. So because you’re in theory going to make more money with a college degree, “we don’t need to tax the college degree because we get to tax the higher earnings on the back end.” From a tax theory perspective, it makes sense not to tax people going to college because going to college means there’s going to be more income to tax later.
Congress has made these policy decisions, they’ve been around for years and years. The idea that you would tell one very narrow group of college students that suddenly, “oh no, your scholarship will be taxed” is just among the worst ideas I’ve ever heard in my life. There’s really no other way to put it. First of all, it looks punitive. It looks like you are essentially upset that somebody has something and you don’t like that they have it and you’re going to tax them as punishment.
Folks on my side of the aisle who are opposed to say, a capital gains tax, or some sort of extra high tax rate on high earners will make the argument that it’s not sound tax policy to do so and is really just an example of people who don’t have a lot of money being jealous of the success of people who do have a lot of money. And that is essentially what it appears Richard Burr is doing. It looks like he is upset there is a group of people that have athletic talent that can both go to school for free and also make a lot of money, and he objects to their ability to do that because it upsets him. And what pervades this entire discussion — whether you’re talking about compensating athletes in general or taxing their scholarships — is that the vast majority of division one college athletes in basketball and football are African American. The vast majority of coaches, athletic department officials, and NCAA employees, the ones where all of the money in the system flows to because it’s not allowed to float to the players, are predominantly white. Sometimes it’s hard to escape from those sort of racial undertones in these conversations, so that really upset me.
But I’m a legislator, I’m supposed to deal in facts and not emotions. At the end of the day, what it comes down to is it’s just bad tax policy. One of the universal principles that everybody on all sides of the aisle will agree on is that similarly situated taxpayers should be taxed similarly. We can debate what a fair rate is. Everybody agrees that if you have two similar situated taxpayers, they should pay the same tax. This proposal[from Senator Burr] violates that fundamental precept that everybody agrees on by saying: “Two students, both of whom are on scholarship, one of whom gets a job at a lab and the other gets a sponsorship with Nike, we’re going to tax the latter but not the former.” The very idea that a US Senator would make this proposal is very disturbing and problematic.
Read part two of this interview here.
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