November 27, 2012
The Impact of Tax Reform on Major League Baseball
Fox News: Tax Increases Could Factor in MLB Negotiations, by Ronald Blum:
As free agents negotiate deals this offseason, tax policy is an area that comes up along with the usual issues. Some players are wrangling for as much money as they can get before the end of the year to avoid a take hike in 2013. ... With baseball contracts worth as much as $275 million (Alex Rodriguez) and the major league minimum $480,000, tax policy affects every player who spends most of the season in the big leagues. ...
According to an analysis done by a tax lawyer on the staff of agent Scott Boras, a player with a $10 million salary and average deductions who plays in Florida and is a resident of that state will see his taxes rise from $3.45 million this year to $4.09 million next year under current law. If traded to the Blue Jays, that player's 2013 tax would rise to $4.27 million. And if dealt to a California team, the tax would go up to $4.4 million.
By moving money from salary into signing bonuses, players can sometimes lower their state tax bills. Shifting money into December this year could reduce federal taxes.
In the end, most free agents choose teams based on where they want to play, not on lowering the tax cut on their income.
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