The "Jock Tax"

[borg]

Reading an article discussing the tax liability Joe Flacco faces with his new 6 year/$120 mill contract, the "jock tax" gets discussed....

"And that’s excluding his “jock tax” liability for away games – play the Patriots at Gillette Stadium, pay Massachusetts income tax on earnings for that game."

http://www.atr.org/tax-bite-leaves-flacco-second-best-a7506

I will admit I never knew players were taxed based on where each and every game is played. Knowing this now, don't teams in state income tax free states have an enormous advantage in luring FAs based on after tax dollars paid.

Using a $120 mill annual salary payout, Dolphin players pocket $10 mill after tax dollars more than Raven players. Why these teams can't use this advantage to build stronger teams is puzzling. As state tax rates escalate, it's possible players may become more conscious of the take home possibilities.

Anyway, interesting article for those like me that like to understand the business side of the game.

 

[signbabybrady]

Interesting. And this actually means teams in states that take less taxes actually have less of an advantage than I had originally thought.

I always new state's tax rates could allow some team's players to pocket more and always figured those teams would use this to their advantage. But I had always assumed all 16 checks were accounted for in the home team's state but this means those teams only get the benefit for 8 home games and are subject to whatever road rates apply as every team would be.

Funny thing is this means little to the states especially with the new cap floor moving forward as there will always be 8 games with two full rosters played in these locations but the players will not always play their 8 road games in beneficial tax locales.

I wonder if this one minor thing is one of many things that could throw off a young mans financial planning. If they expected X not realizing some games would be taxed more.

 

[Gumby]

Reading an article discussing the tax liability Joe Flacco faces with his new 6 year/$120 mill contract, the "jock tax" gets discussed....

"And that’s excluding his “jock tax” liability for away games – play the Patriots at Gillette Stadium, pay Massachusetts income tax on earnings for that game."

Americans for Tax Reform : Tax Bite Leaves Flacco Second Best Paid in NFL

I will admit I never knew players were taxed based on where each and every game is played. Knowing this now, don't teams in state income tax free states have an enormous advantage in luring FAs based on after tax dollars paid.

Using a $120 mill annual salary payout, Dolphin players pocket $10 mill after tax dollars more than Raven players. Why these teams can't use this advantage to build stronger teams is puzzling. As state tax rates escalate, it's possible players may become more conscious of the take home possibilities.

Anyway, interesting article for those like me that like to understand the business side of the game.

long been a (minoe) point of discussion on the detailed cap threads here; but at the end of the day I think it comes more into play w/ HOW they structure contract (I think salary and bonuses tax different fed as well as bonus may apply to perm resid st; if maintain a home away from team home st)).

some of it is maybe unsophisticated players; but historically it (st taxes) has seemed to be a relatively low weighted decision criteria.

At end of day there are a lot of personal factors that will weigh more than generic tax %.

remember too that rich can afford to organize their life to pay less tax. W Buffett is great about complaining that he pays a lower % than his scty, but that doesnt stop his acctants from using every legal tax break imaginable.

 

[upstater1]

Reading an article discussing the tax liability Joe Flacco faces with his new 6 year/$120 mill contract, the "jock tax" gets discussed....

"And that’s excluding his “jock tax” liability for away games – play the Patriots at Gillette Stadium, pay Massachusetts income tax on earnings for that game."

Americans for Tax Reform : Tax Bite Leaves Flacco Second Best Paid in NFL

I will admit I never knew players were taxed based on where each and every game is played. Knowing this now, don't teams in state income tax free states have an enormous advantage in luring FAs based on after tax dollars paid.

Using a $120 mill annual salary payout, Dolphin players pocket $10 mill after tax dollars more than Raven players. Why these teams can't use this advantage to build stronger teams is puzzling. As state tax rates escalate, it's possible players may become more conscious of the take home possibilities.

Anyway, interesting article for those like me that like to understand the business side of the game.

$120m x 6% = $7.2m, but then half the games are away, so the advantage is $3.6m, and then consider state taxes offset federal taxes by a % for deductions, so you're at $2.9m divided by 50 players. That's about an average of $100,000 to $150,000.

 

[ctpatsfan77]

long been a (minoe) point of discussion on the detailed cap threads here; but at the end of the day I think it comes more into play w/ HOW they structure contract (I think salary and bonuses tax different fed as well as bonus may apply to perm resid st; if maintain a home away from team home st)).

Two things:

(1) The rules for withholding from bonuses/salary may be different, but the actual tax owed is independent of what they call the money.

(2) Also, don't forget that many states have reciprocity agreements as well, so they get a break on their state taxes (e.g., they're not paying MA and other-state taxes).

 

[jmt57]

I have long felt that teams in states with no income tax would have an advantage recruiting free agents, but history shows that to not be true. If that was the case then free agents would flock to Tampa Bay, Miami, Houston, Dallas, Seattle and Tennessee, but that has never been the case.

So why is that? Do teams not bring that up in negotiations? Does the agent, who is not affected by those state income taxes, more inclined to steer a player to a club that will pay a higher gross even if it results in the player receiving a lower net? How much does the ego of a player come in to these decisions, where the headline dollar figure of his contract may be more important to him than his actual net pay?

 

[Tyler.Durden]

Consider the tax situation of baseball and basketball players who play in almost each and every state in the country. Means having a good accountant is pretty darn important.

 

[PatsWickedPissah]

Good reason to move the Pats to NH!

 

[Frezo]

When I was working for a NH based company, we'd send employees all over the country. They were not required to pay various state income taxes because their pay check always had the same NH based company address on it. The company was required to pay a business tax to those states though. I don't understand why this doesn't carry over to pro athletes.

 

[Joker]

I want to get in on this tax crap...from now on, everyone on planet earth will be required to pay ME, Joe Kerr, King of Men, one penny for every day of breath they've ever taken...retroactive...and please, NO CANADIAN COINS!

 

[QuantumMechanic]

When I was working for a NH based company, we'd send employees all over the country. They were not required to pay various state income taxes because their pay check always had the same NH based company address on it. The company was required to pay a business tax to those states though. I don't understand why this doesn't carry over to pro athletes.

Actually, the employees were technically subject to out of state income tax. However, for just a day's work or so a normal employee would earn too little to pass the threshold for actually owing tax (let alone filing) to the non-resident state. Plus the states have no idea when and for how long the employee was there.

But athletes (and entertainers) get paid big bucks plus it is trivially easy to know when they are working in the state (just look at the league/tour schedule!). So they both pass the thresholds and are definitively known to be in the state.

 

[PatsWickedPissah]

Actually, the employees were technically subject to out of state income tax. However, for just a day's work or so a normal employee would earn too little to pass the threshold for actually owing tax (let alone filing) to the non-resident state. Plus the states have no idea when and for how long the employee was there.

But athletes (and entertainers) get paid big bucks plus it is trivially easy to know when they are working in the state (just look at the league/tour schedule!). So they both pass the thresholds and are definitively known to be in the state.

So I'm on IR or injured that week when the team, not I, goes to CA. Does CA who "knows" the Pats were there sunday come looking for my tax return?

 

[lurker1965]

When I was working for a NH based company, we'd send employees all over the country. They were not required to pay various state income taxes because their pay check always had the same NH based company address on it. The company was required to pay a business tax to those states though. I don't understand why this doesn't carry over to pro athletes.

I assume it has to do with the players not technically being "employees" but "independent contractors."

 

[lurker1965]

I want to get in on this tax crap...from now on, everyone on planet earth will be required to pay ME, Joe Kerr, King of Men, one penny for every day of breath they've ever taken...retroactive...and please, NO CANADIAN COINS!

Ok, Lira OK? oh, the went to the Euro. How 'bout Peso? (Canadian looks better now, eh?)