In the last 35 years, states, counties, and cities have enacted 240 “megadeals”—amounting to at least $75 million apiece—that dole out corporate welfare in hopes of spurring “economic development.” If you take naive calculations at face value, those subsidies have spent $456,000 per job ostensibly created. Of course, the economics behind subsidies creating any jobs at all are shaky at best. Yet these sorts of policies persist, using the same economic rationales, whether they are tax credits for biotech or cities giving sweetheart deals to local sports teams.

Judith Grant Long, in an extensive study on the historical realities of “partnerships” between governments and major sports teams, has found that the public on average bears 87 percent of the cost for new stadiums. Stadium deals are among the most flagrant examples of giving money to rich people in hopes of “creating jobs.” As shown by John Siegfried and Andrew Zimbalist in a 2000 issue of the Journal of Economic Perspectives and Dennis Coates and Brad Humphreys in a 2008 issue of Econ Journal Watch, economists as a profession are as united against subsidies for sports stadiums as they are united on any issue. Yet, despite the constant pushback from the economics profession, stadium proponents are winning the war.

Activism by economists, libertarians, and the informed public has delayed many proposed stadiums, but most of them ultimately wind up getting built at great public expense. In other words, we have won some battles, but not the wars. After years of fighting for subsidies, the Miami Marlins got them and in 2012 built a gaudy stadium, in part financed by $91 million in bonds issued by Miami-Dade County. The financing was handled so poorly that the $91 million in bonds will eventually become a $1.2 billion obligation. While the anti-public-financing activism has been a clear public good, government officials will continue to view themselves as being trapped in a prisoner’s dilemma, fighting for a finite number of teams.

Taxing local subsidies / There is a policy proposal already on the table that would stop this behavior in its tracks. But it is counterintuitive to the ears of many free market proponents because the solution involves a tax. In principle, the Internal Revenue Service could count money contributed by the state, county, and city toward the building of a stadium as imputed rent for the team owner—because that is exactly what it is. It could tax that income at the same rate it taxes other income. In effect, the federal government simply grabs back some of the corporate welfare that the other levels of government tried to give the team owner.

The IRS could even tax the income at 100 percent. Marginal tax rates that high have predictable consequences. When the marginal tax rate on income is 100 percent, we expect there to be approximately zero income. Likewise, when the marginal tax rate on rent-seeking is 100 percent, we should expect there to be approximately zero rent-seeking. The tax in practice would raise no revenue whatsoever and there would be no reason why team owners would even ask governments for money. We would be on the “wrong” side of the Laffer Curve, and that would be a good thing.

This type of proposal isn’t a new idea. Arthur Rolnick, the longtime director of research at the Federal Reserve Bank of Minneapolis, has made this case for many years, most recently in 2007 congressional testimony. Yet, awareness of this proposal among free market advocates apparently is minimal. It is exactly the type of proposal that skeptics of government intervention should advocate for, or at least they should carefully weigh its merits. This is a “new tax,” but it is a tax that will raise little or no revenue while reducing or even eliminating a huge source of graft and waste. On balance, that seems like a real win, even if it uses the “t” word.

One counterargument to this idea is that it is unlikely to gain passage because politicians at the federal level are no wiser or more angelic than their counterparts at lower levels of government. That is true, but federal politicians do not face the same incentives as a state or local politician. Local politicians perceive it to be the case—whether or not it is true—that they must fund corporate welfare to keep jobs from getting stolen by some other jurisdiction. Since federal politicians as a group do not have this concern for the industries in question, they may be better incentivized to implement this reform.

Those still skeptical of the positive ability of the federal government to do much of anything beneficial should heed Rolnick’s apt analogy of this proposal to the dormant Commerce Clause. Just as the dormant Commerce Clause has successfully stopped states from erecting trade barriers on one another, it is reasonable to believe the federal government may be able to stop states from engaging in other ruinous negative-sum games that purport to create jobs. In terms of positive actions possibly undertaken by the federal government, that is about as free market as it can get.

Stadiums are merely the most concrete example of this idea. The tax could govern all forms of “economic development” legislation that are little more than corporate welfare. State legislators thus would no longer get to play central planner by handing out tax breaks to manufacturers or biotech firms.

Should we expect this solution to work perfectly? Clearly, no. This is a political solution. Inevitably, as the proposal goes through the political process, various exemptions will get tacked on. And states will try to get around it in other ways, for example by spending more than they should to upgrade infrastructure serving otherwise privately financed stadiums. But even an imperfect solution significantly reduces the benefits of rent-seeking—and that is what matters.