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Monday, January 21, 2013

Golfer Phil Mickelson Plans 'Drastic Changes' in Response to His 63% Marginal Tax Rate

PhilSports Illustrated:  Mickelson Plans 'Drastic Changes' in Response to Tax Hikes:

Phil Mickelson said he will be making "drastic changes" because of recent tax increases, including California's new, highest-in-the-nation income tax on the wealthy, and he suggested that the tax was one of the reasons he withdrew from the investment group that purchased the San Diego Padres.

"There are going to be some drastic changes for me because I happen to be in that zone that has been targeted both federally and by the state and, you know, it doesn't work for me right now," Mickelson said after his T37 finish at the Humana Challenge in Palm Spring, Calif. "So I'm going to have to make some changes."

Unlike most of his fellow PGA Tour players who live in tax-friendly states like Florida and Texas, Mickelson chooses to live in high-tax California, his home state, where residents voted in November to raise tax rates to 13.3 percent from 10.3 percent for those making more $1 million. ...

"If you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rate's 62, 63 percent," Mickelson said. "So I've got to make some decisions on what I'm going to do."

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Comments

Bravo! I have a feeling many more high-net worth earners will leave California due to these laws.

Posted by: Lt. Dangle | Jan 21, 2013 12:17:43 PM

Trust me, he's not paying 63% of his income in taxes. Not even close. He's confusing marginal rates with average rates, and he's also ignoring effective rates (which take into account deductions and credits).

Posted by: Jim Maule | Jan 21, 2013 12:48:14 PM

Phil is one of the greatest golfers ever, and one of the best person in sports but here he takes a triple bogie. His combined state and federal tax rate is about 49% after one tax effects his state taxes (they are deductible remember) and the rest of the stuff doesn't add much. So in this situation he didn't write down the proper score.

As for leaving California, yes he can go to Florida (but from the article it sounds like he will stay in San Diego) but that would knock only about 9 percentage points off his tax bill. It is true that the tax system is heavily biased against a high income self employed person, too bad Phil cannot be treated like a private equity manager and get the carried interest benefit.

Finally notice that he made over $40 million last year. Forty million for playing golf. The rest of us pay thousands of dollars a year to play golf. Phil has $20 million in after tax income from being a golfer. So who exactly would not be willing to trade lives with Phil? Anyone? Didn't think so.

Posted by: David R. | Jan 21, 2013 1:36:30 PM

Doesn't it matter how much of his income is actually earned in California versus some other state?

Posted by: HTA | Jan 21, 2013 3:04:47 PM

His marginal rate isn't even 63%.

39.6% federal
13.3% state (deductible, thus effective rate of about 8%)
3.8% medicare (assuming he pays it, which he might not)

39.6% + 8% + 3.8% = 51.4%

Whiny, over-entitled SOB.

It also might be worth pointing out that he earned $47 million dollars last year for swinging a golf club well.

Posted by: Anonymous | Jan 21, 2013 3:20:03 PM

The man is a golf pro not a finance wiz....let alone does he really know his effective tax rate....gee that SS will raise his bill on $30 million. But he could save money by moving to the hot and humid Texas and Florida....at least he would save money but he will have a lot more insects chasing him on his patio and a lot more snakes in the grass at the golf course. Of course he could move to rainy Washington or wonderful South Dakota....real cheap housing and cost of living but what do you get.....Phil....you have to pay for that sunshine and wonderful weather.....remember its location location and you have to pay for it........

Posted by: Sid | Jan 21, 2013 4:51:04 PM

Typically, two regular commenters on the left pointed out that Mickelson was one of "the rich," although that has nothing to do with anything except to support that the left is motivated by envy.

Posted by: Woody | Jan 21, 2013 7:12:30 PM

The back of the envelopers posting here are probably right that Phil's conventionally defined MTR can not be 63%, but to be fair, if the gap between reality and his claim is so large, why game the calculation: for example, where is the new 3.8% surcharge enacted as part of the ACA? and what is the effect of the phaseouts? If we are still "only" looking at a 55% marginal tax rate, then let's not just say that 63% is an incorrect number (and how could he be so this and that), but say 55% is fair (and say who else should have to pay that much). Also, Phil Mickelson is a family man, and I am sure that at this point he is basically earning money to pass on to his family. Add gift taxes and estate taxes on income marginally taxed at 55% and you get a de facto MTR of...BTW, I am not anywhere close to be in a position to where Phil Mickleson would like to trade, but neither would I like to trade with him.

Posted by: MG | Jan 22, 2013 6:13:57 AM

I could introduce him to some unemployed manufacturing workers. They have no tax problems.

Posted by: save_the_rustbelt | Jan 22, 2013 7:12:38 AM

When Phil said he was considering doing something "drastic," I don't see that as implying that he was simply going to move to Florida. And moving to another state would not change his Federal taxes. Since he didn't say no when asked if it meant retiring or moving out of the country, I'd say he meant to imply that he was considering moving overseas.

So, how does retiring or moving overseas help his bottom line? If he retires, he can't collect golf winnings. (Plus, his competitive nature won't let him retire. He still wants a US Open and more wins at the Masters.) No matter the tax bracket, earning taxable income is always better than zero income. And, if he moves out of the country, that can't help his popularity and will probably threaten his endorsement deals. No matter the tax haven he finds overseas, it doesn't seem to add up as becoming more favorable then winning and earning millions of dollars as a US resident and paying US taxes. I take this as whining and speaking about it before really thinking it through. I used to be a big Phil fan but can't really appreciate his latest comments. He should have just left California during the night, kept his mouth shut, and play good golf. I would definitely not fault him for moving to a more tax friendly state but take offense if he moves overseas. I sure won't be buying new Calloway clubs anytime soon.

Posted by: Stephan | Jan 22, 2013 7:30:45 AM

To no surprise, Phil recants his statement: http://blogs.golf.com/presstent/2013/01/phil-mickelson-apologizes-for-comments-on-taxes.html

I think his endorsement cash register started sounding the alarm bell, which deafened his tax calculator.

Posted by: Stephan | Jan 22, 2013 7:48:18 AM

Hollywood millionaires can talk about taxes and not cause conservatives to go apoplectic. But, on the flip side, just let a millionaire who feels differently express his opinion and he's forced to issue an apology and shut-up.

Update: Mickelson apologizes for tax talk

... "Finances and taxes are a personal matter, and I should not have made my opinions on them public. I apologize to those I have upset or insulted and assure you I intend to not let it happen again." ....

Texas Gov. Rick Perry even weighed in with this tweet: ''Hey Phil....Texas is home to liberty and low taxes...we would love to have you as well!!'' ....

Posted by: Woody | Jan 22, 2013 10:13:36 AM

And the Right is motivated by greed. He plays golf for a living! Good god, shut up, pay up and play. You might have to do real work if you do not.

Posted by: George | Jan 22, 2013 2:35:02 PM

@Woody

Who exactly forced Mr. Mickelson to apologize? And notice that many of agreed that Phil is highly taxed, but were raising the legitimate issue of whether or not he computed his taxes correctly. If you venture into the public debate you need to have your facts straight.

But you are right about one thing, I for one am just one of millions who envy Phil, but only for his golf game. If I could shoot like he does I would be willing to pay 110% in taxes.

Posted by: David R. | Jan 22, 2013 4:14:32 PM

David R., the left-wing blogosphere lit up and started a campaign to complain to Mickelson's sponsors, and that was over his suggestion that a high tax state is driving him out and not whether he had the numbers just right. High is high, no matter whether it's 63% or 52%.

See Paul's latest post on this topic. Oh, and Tiger Woods did the same thing, but let's not discuss that because the Left loves Tiger as much as Tiger loved women outside of his marriage.

Posted by: Woody | Jan 23, 2013 6:54:30 AM

Moving to Florida will not change his state tax bill on what he earns PLAYING the game. If he cashes a check for winning (or coming in 10th) in a tournament in Penna., he pays PA tax on that income whether he lives in CA or FLA. His endorsement and investment income would be taxed in the state of residence and his Federal bill obviously would not change.

Posted by: mark | Jan 23, 2013 12:06:38 PM

Mark: If Phil wins a tournament in PA, he pays PA tax on those winning. However he still pays CA tax on all his income and gets a credit for the PA taxes.

So, yes, his taxes on winnings are higher if he remains a CA resident.

Posted by: Elmer Stoup | Feb 4, 2013 8:51:01 AM