California’s income tax rate drives NFL players away

Ndamukong SuhLast month on CalWatchdog.com, prompted by the efforts to build a Los Angeles football stadium and lure an NFL team, I wrote on how Proposition 13’s tax-vote provisions were influential in the moves and counter-moves on the stadium debate over public funding.

But the state’s high income tax rates also are a factor when individual players consider accepting free-agent contracts with California teams.

When all-pro tackle Ndamukong Suh decided to leave the Detroit Lions, he considered an offer from the Oakland Raiders. However, he ended up accepting an offer from the Miami Dolphins for $60 million.

On the sports website ESPN, Chris Mortensen pointed out:

“Florida doesn’t have any state income tax, so in order for the Lions and the Raiders to match the after tax net earnings on a $60 million guaranteed, the Lions would have had to pay Suh approximately $64.9 million and the Raiders would have had to pay $70.1 million, said sports tax specialist Robert Raiola, senior manager at the accounting firm O’Connor Davis in New York.” 

The California Taxpayers Association published a more detailed examination of California’s tax rate on NFL player contracts:

“All teams in the National Football League operate under a league-imposed salary cap, but because the cap ($143,280,000 for 2015) is not adjusted for states’ differing income tax burdens, California teams are at a disadvantage because the Golden State has the highest income tax rate in the nation.”

‘Advantage’

The CTA quoted Jim Pagels of Forbes, who wrote:

“Teams in states with low or no income tax have a huge advantage in that they can offer vastly more money to prospective free agents. The difference between teams in Washington, Texas, Tennessee and Florida, where no state income tax is levied, versus those in California, which takes a whopping 13.3 percent, is staggering – $19.1 million. To put that difference in perspective, $19.1 million after taxes is more than any player in the NFL has ever earned per year, meaning teams in taxless states can essentially afford a California roster plus the most expensive player in NFL history on top of that each and every year.”

The state’s income tax may even cause sporting events not to take place in California.

While boxers Manny Pacquiao and Floyd Mayweather finally have decided to duke it out this coming May in Las Vegas, there was serious talk of a Pacquiao-Mayweather fight back in 2009. At that time, the Los Angeles Staples Center arena offered a $20 million site fee to host the event.

As I wrote in my Fox and Hounds column at the time, Pacquiao’s business advisor threw cold water on the offer:

Noting that Paciquino would have to pay millions in taxes to California under the current 10.55 percent top tax rate, the advisor said the fighter didn’t want to fight in California when there were alternatives in no income tax states like Texas and Nevada.”

Now, after the passage of the $7 billion tax increase from Proposition 30 in 2013, the California’s top tax rate is up to 13.3 percent.

4 comments

Write a comment
  1. Hondo
    Hondo 20 March, 2015, 20:34

    Why do you think Labron James never went to the Lakers? Why do you think warm blooded Peyton Manning stiffed the 49ers for cold Denver? Plus, because Kali teams got to pay more because of taxes, it messes with the cap space so they can’t afford any other good players. The GS warriors are a gifted team but you won’t see any other good players go there. Why do you think Shaq went to Miami?
    Baseball doesn’t have a cap so SF Giants can compete for players and have been quite successful. The tax rate is killing Kali teams because of the cap.
    Hondo…..

    Reply this comment
  2. Richard Rider
    Richard Rider 20 March, 2015, 20:58

    Californians hate millionaires (defined as anyone making more than $250,000 a year). But many love their pro sports teams. It’s a great idea to reach out to sports team fans and point out the nexus between high state income tax rates and the resulting decline in CA pro sports teams.

    Such teams in LA and SF are in such rich or large demographic areas that they can sometimes offset this tax disadvantage with bonuses. But teams in Oakland, Sacramento and San Diego are likely doomed to mediocrity (or worse) as they lose the bidding contests for high priced talent.

    Reply this comment

Write a Comment

Your e-mail address will not be published.
Required fields are marked*



Related Articles

Affluence police tee off on Mickelson

Jan. 28, 2013 By Steven Greenhut SACRAMENTO — After hearing the criticism directed toward golfer Phil Mickelson for his modest

Kashkari draws a media crowd

Neel Kashkari, Gov. Jerry Brown’s Republican challenger, has been playing a long game. That hasn’t been immediately evident from the frenetic

Budget Battle Poisons Pesticide Rules

JUNE 22, 2011 By WAYNE LUSVARDI Politicized environmental regulation is becoming a protection racket to collect votes. To pass Gov.