February 3, 2013
'You'd Be a Fool Not to Leave California'
Is Lefty's stance on California's tax hikes a sign of things to come for millionaire athletes?
The Golden State's new 13.3% income tax on top earners prompted golfer Phil Mickelson to say earlier this month he was considering a move, and according to the accountants who advise millionaire athletes, he was just saying what a lot of jocks were already thinking. Federal taxes on the top income bracket just rose by roughly 5%, and, while there's nothing rich athletes can do about that, they are paying attention to which states dip into their game checks — and how much they take.
“They’re going to have an exodus of people,” said John Karaffa, president of ProSport CPA, a Virginia-based firm that represents nearly 300 professional athletes, primarily in basketball and football. “I think they’ll see some [leave California] for sure. They were already a very high tax state and it’s getting to a point where folks have to make a business decision as well as a lifestyle decision.”
The taxes of professional athletes became incredibly complicated in the early 1990s, when aggressive state and local tax collectors began targeting them to pay non-resident income taxes. Technically, all employees who earn money for work done outside their home states have to pay non-resident taxes, but enforcement has focused on millionaire athletes with publicized work schedules to the extent is is commonly called the "jock tax." Although ballplayers can't get out of the state and local taxes they pay while on the road, where they play their home games can make a huge difference. California takes 13.3% on income above $1 million, but states like Florida, Nevada and Texas are among seven that take nothing.
It adds up, says Karaffa. As tax season enters full bloom, he expects to see an uptick in the number of clients who will consider leaving California. Under a hypothetical calculation, the tax difference for a single professional athlete making roughly $10 million a year between being a resident of California versus Florida is around $800,000 annually. ...
For top golfers and tennis players, who make most of their money through endorsements not subject to the "jock tax," the choice of where to live has a huge impact. Mickelson, of Rancho Santa Fe, Calif., quickly apologized for riling critics on Jan. 20 when he said an effective federal and state tax rate of 60-plus percent seemed excessive. But he was likely only saying what others were already thinking, especially after California voters approved Proposition 30 last November. In addition to raising the state sales tax, it imposed a menu of new tax brackets. Just the increase of the top bracket to 13.3% from 10.3% cost Mickelson roughly $1.8 million of his $60 million income for 2012.
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All those California law professors making a million or more should take note. ;-)
Posted by: Woody | Feb 3, 2013 11:05:29 AM
How is Mickelson supposed to make ends meet on $30 million per year after taxes? You can barely afford to buy four mansions per year on that pittance.
He works hard for a living playing Golf. It's not like he's being paid unimaginable sums to do something frivolous, like pulling people from burning buildings or researching a cure for cancer.
California should do the right thing and cut spending on roads, schools, hospitals, and pubic safety so that Mickelson can keep more of his take-home pay.
And thank God the enlightened people of Arizona are willing to offer Michelson a safe-haven from those evil moochers in California.
Be forewarned, liberal do-gooders! Atlas will shrug. You may have roads and bridges that won't collapse, but the world of professional golf will never be the same!
Posted by: Anon | Feb 3, 2013 4:30:22 PM
We face the same problem here in Hawaii. A lot of film stars have homes here, but many are leaving because of the state's high taxes. The poor cannot pay the taxes, the rich will leave rather than do so; clearly higher taxes are not a solution. Ending the costly wars and bailouts, then getting rid of the private central bank issuing all public currency as a loan at interest is. What Iceland did following the 2008 bank fraud worked. Why are we not doing the same?
Posted by: Michael Rivero | Feb 4, 2013 9:18:34 AM
It's a dadgum shame that all the smart people are making comments on blogs while the idiots run the government.
Posted by: Woody | Feb 4, 2013 4:29:57 PM