Story Behind the Big Fight: A Tax and Counterattacks

Saturday’s welterweight showdown between Oscar De La Hoya and Shane Mosley at Staples Center will be the richest fight in California history.

In terms of quality, it is the type of event that can make this state competitive with Nevada, New York and New Jersey for the big boxing shows.

In terms of quantity, it’s already no contest. For the last decade, California has staged more boxing shows annually than any other state.

Saturday’s fight should be the crowning moment for the California State Athletic Commission and its executive officer, Rob Lynch.

So why does Lynch’s coronation look more like an execution? Why have he and his fellow commissioners been under fire by everyone from promoter Bob Arum to Staples Center President Tim Leiweke to members of the state legislature? Why have they been labeled the anti-boxing boxing commission?

Because commission members, while insisting they welcome the De La Hoya-Mosley bout with open arms, have firmly folded their arms and refused to budge on two key issues:

* They vigorously oppose two proposed bills in the state legislature that would put a cap on taxes derived from the bout. Proponents of the bills say the cap is necessary to lure big bouts to California. Lynch and other commissioners maintain they can’t afford to lose the tax money.

“The commission is about to make the most money it has ever made in a fight,” Leiweke said. “I can’t believe the commissioners are not out actively helping us bring more fights here through this tax bill.

“If their attitude is that these fights are going to happen anyway, they are absolutely wrong. This will be the last major fight in California if this bill doesn’t pass. We will not touch boxing again.”

* The commissioners are investigating Arum, De La Hoya’s promoter, after his admission in a declaration in the U.S. Attorney’s Office in New Jersey and subsequently in court that he secretly paid the International Boxing Federation to get a George Foreman fight sanctioned.

The Gap

California staged 82 boxing shows in 1999. In comparison, Nevada, its chief rival because of the lure and riches of the Las Vegas casinos, held 41 shows. New Jersey, despite its Atlantic City casinos, had only 16 shows. New York, where Madison Square Garden is trying to revive its image as the mecca of boxing, also had only 16 shows.

“How can we be anti-boxing,” Lynch said, “if we have more boxing than any other state?”

Revenue, however, is another story. Because it attracts mostly the high-profile, multimillion-dollar fights, Nevada was able to generate $2.8 million in boxing revenue last year from its 41 shows.

On the other hand, California, with the shutdown of large venues such as the Great Western Forum and the Olympic Auditorium, is left largely with hotels and clubs. As a result, its 82 shows brought in only $736,000.

Without adequate funds, the California commission has to rely on the state’s general fund for 3% of its budget. And that, Lynch and other commissioners say, is why a cap on taxes is not acceptable.

The Gate

If the De La Hoya-Mosley bout sells out, the live gate will be $8 million, which would be more than eight times the previous record, a $700,000 gate for a 1990 Sacramento fight between Jorge Paez and Tony Lopez.

With a 5% state tax on boxing, wrestling and martial arts shows, the tax bill will be $400,000 for De La Hoya-Mosley. In addition, there is a 3% city tax, which will come to $240,000 for next Saturday’s event.

Such numbers are not out of line with Nevada, where Arum paid $517,960 in taxes for last September’s De La Hoya-Felix Trinidad fight, which brought in $12,949,000.

The Goal

Arum and Leiweke have appealed to the California legislature for tax relief.

When it became apparent that the legislative route was going to be a long one, Leiweke agreed to assume Arum’s tax burden above $50,000.

A bill was introduced into the Assembly that proposed a $50,000 tax cap for boxing, wrestling and martial arts shows. Some opponents of the bill questioned whether the state should be giving relief to multimillionaires like Arum.

The smaller promoters were also upset that there was no relief for them. All promoters, regardless of the size of their shows, must pay a minimum of $1,000 in taxes. For some, that means 10% of their revenue.

The commission came out firmly against the bill.

One source within the commission said that some commissioners were angered by what they perceived as an attempt by Leiweke to bypass them and go directly to the legislature.

“I could sit here and say the commission has never approached me since the day I booked this fight,” Leiweke said. “I haven’t heard from them, but I don’t hate them. I think that, ultimately, we are going to have to work with them.

“But they should be patting us on the back, not kicking us in the rear.”

The Assembly bill is now stuck in committee, but a compromise bill has reached the state Senate, one that increases the cap to $75,000, removes the $1,000 minimum, cuts the tax rate for those fights with a live gate under $1 million from 5% to 3 1/2%, and mandates that all taxes collected in excess of $35,000 go into the Professional Boxers’ Pension Plan Fund.

The commission is still opposed.

Lynch estimates that reducing taxes to this degree would force the commission to increase its reliance on the general fund from 3% to 6% for boxing and up to 17% for wrestling.

“How could that possibly be true?” Leiweke said. “They are going to make more next Saturday than they have made in many, many years on an annual basis. . . . I will make [Lynch] a deal. If he looks at his true out-of-pocket expenses for our fight, I will pay him that and I assure you it will be a lot less than the taxes we are going to pay. Are they trying to tell me their expenses are $300,000 to $400,000?”

Commissioner Al Ducheny is a strong opponent of both versions of the tax bill.

“The first bill gave a gross break to big promoters,” Ducheny said, “and screwed the little promoters. This second bill gives a break to the big promoters and gives a break to the little promoters and screws the commission.

“It is not up to the state of California to subsidize boxing. With the kind of money the promoters and boxers are making, there is no problem here. I know Bob Arum and the Staples Center would like to make more money, but they cannot do it at the expense of the commission.”

Leiweke concedes that De La Hoya-Mosley won’t reap big profits.

“We will not make much money on this fight,” he said. “We are big boys. We understand the risk. But if I took this deal in for a loan, I’d get thrown out of every bank in America.”

Assemblyman Gil Cedillo (D-Los Angeles), author of the boxing relief plan, insists California won’t get big fights without a tax cap.

“One hundred percent of nothing is still nothing,” he said. “What did we bring in last year in terms of big fights, or the year before? You can go back 25 years and there is still nothing.

“This is one of those rare bills that I have real confidence will do what it promises to do in a very short time and that’s the creation of jobs that benefit the whole community. Yes, athletes make a lot of money. But people don’t say we should not support the Lakers because of the money they make. When there are big sporting events, the parking lots are packed, people are buying the concessions and the janitorial services are working. And tourists spend money.”

Lynch says Cedillo is making illogical predictions.

“The author of the bill,” Lynch said, “guaranteed that we would have five fights with $1-million gates each year. That is total speculation, since last year there were only four of those fights in the entire U.S.”

Neither Nevada nor New Jersey have caps on their boxing tax, but New York has a $50,000 tax limit.

“If we reduce our fees, what if they reduce their fees more?” Ducheny said. “What are we going to do, get into a war with them? It’s outrageous.

“They put their cap on and they have had two big fights [the first Lennox Lewis-Evander Holyfield match and De La Hoya-Derrell Coley] since. We have no cap and we already have one big fight. So let’s get rid of all this cap business.”

Said Cedillo: “New Jersey has positioned itself to get big fights from New York, and Nevada has done the same thing to us.”

Speaker of the Assembly Robert Hertzberg (D-Sherman Oaks) had been opposed to the tax legislation when there was an urgency clause on it with the aim of getting it through in time to affect De La Hoya-Mosley. Once the urgency clause was removed, he dropped his opposition.

“The Speaker is a supporter of leveling the playing field with other states,” said Paul Hefner, a spokesman for Hertzberg.

The Guardians

For its tax fees, the commission licenses the fighters, assigns the officials--such as the referee, judges and ringside physician--and monitors the bouts to see that they are competitive.

“They do a very, very good job,” said Marc Ratner, executive director of the Nevada commission. “On health and safety issues, the California commission is considered one of the finest in the country.”

Said Ducheny: “What does the city of Los Angeles provide for its 3% tax? What they provide is nothing. If Los Angeles wants big-time fights, they might start with their own 3% which they skim off the top.”

Countered Leiweke: “The city tax is an obligation put on every ticket for every event. That one is not going away. They [the commissioners] don’t understand what they are talking about. They are wrong. The city has invested tens of millions of dollars in Staples Center and this tax is helping to pay the city back.”

The Arum investigation will have no effect on the De La Hoya-Mosley bout because it won’t even be considered by the commission for at least several months.

But the commissioners, citing a rule that requires them to safeguard their program against those who have acted “detrimental to the best interests of boxing,” plan to push on with the Arum investigation, critics, or no critics.

“Anti-boxing?” Ducheny said. “It seems to me we are pro boxing.”