of states with no income taxes, so there is no comparison in the article posed between CA, IL, NY, and, say, Texas or Florida. The eyes would pop out if you made Machado a NY resident and then had him choosing between the Yankees and the Rangers. An old boss of mine moved from Wisconsin to Texas and got a 10% increase in take-home pay with no change in salary.
The D.C. exemption is interesting. Who was it put in for - politicians?
I believe the article spoke about the jock tax. The salary is not taxed by his resident state, but where the salary is earned. Each state he plays in gets a proportional amount of the salary (e.g. if he plays 8 games in Minnesota, he has a tax liability for 8/162 of his total salary for Minnesota state tax). Presumably endorsements and other income belong to his state of residence. I'd guess a signing bonus would also, although his home team state might have a claim.
Hence why the Tampa Bay Lightning pay an enormous first-day-if-the-year bonus and a small salary to some of their stars.
Steve Stamkos gets a check for $7.5M on July 1, every year. As long as he’s in Tampa, that’s money earned in Florida. He then gets a salary of $1M, notionally earned I’ve the 82-game season, with 41 Florida home games, whatever number of Florida road games, and other road games in other taxing jurisdictions.
However if he was traded to the Islanders on June 30, the Islanders would pay him his next $7.5M in New York, and he’d have a bunch of New York home games, all incurring more tax.
The salary cap doesn’t care about this — whether in NY or FL, the cap sees a contract for $8.5M. But it makes a difference to Stamkos.
Let’s say he gets a $8.2 million signing bonus/roster bonus each July 1, then a nominal $820,000 salary ($10,000 per game).
If traded from Tampa to NY after 41 games, do the Islanders pay just $410,000 in salary for a half-season of a $9 million a year player?
Tax-wise, that makes sense as the signing money was earned at signing. But for team player expense, does NY send along $4.1 million in cash to Tampa as a part of the trade, or does NY just get a financial bargain?
In a trade since 2005, so it’s just a financial win for the Islanders in that scenario.
Of course this information is priced into a player’s trade value.
However, it only applies to games in those states. I just wonder what the model looks like if Harper and Machado were coming from high-tax states. Would it be no different or would the offers from team based in low/no-tax states look even better?