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Friday, March 8, 2013

Tax Bite Leaves Joe Flacco Only the Second Highest Paid NFL Player

FlaccoAmericans for Tax Reform:  Tax Bite Leaves Flacco Second Best Paid in NFL:

As reported this week, Super Bowl MVP Joe Flacco and the Baltimore Ravens have agreed to a six-year, $120.6 million contract making the star quarterback the highest-paid player in NFL history, earning an estimated $20.1 million per year. But being the “highest paid player” and earning the most after tax pay are two very different things.

By choosing to remain a Raven, Flacco is now set to pay a combined marginal income tax rate of 51.98%. This overwhelming tax rate is composed of the federal, Maryland, and Baltimore County income tax rate, as well as the Medicare tax. And that’s excluding his “jock tax” liability for away games – play the Patriots at Gillette Stadium, pay Massachusetts income tax on earnings for that game - and other taxes levied against him such as Maryland’s property tax. ...

Flacco may have the distinction of being the highest paid player in NFL history, but New Orleans Saints’ QB Drew Brees still earns more after tax pay. Brees’s contract, which he signed before last season, is a 5-year, $100 million dollar contract that pays around $20 million per year. After applying the marginal combined tax rate of 49.4% to the Saints QB’s contract salary, he stands to make $470,000 more after tax pay than the newly crowned “highest paid player.” ...

Don’t be surprised if players begin to consider their tax liabilities even more now when making the decision of which team to ultimately sign with.

http://taxprof.typepad.com/taxprof_blog/2013/03/tax-bite-leaves-.html

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Comments

This, of course, assumes that Flacco lives in Maryland. I have not been able to find online his state of residence. First we have stories about golfers who play everywhere but live in Florida and pay taxes only on income earned while in each state. Now we have stories that suggest athletes must pay tax on all their Maryland income even though they play only half their games there?

Posted by: Bob | Mar 8, 2013 12:19:11 PM

Wouldn't one need to look at their average income tax rate rather than the marginal rate? While the difference may not change the result given how close both their pay and their tax rates are, it would provide for a more accurate calculation.

Posted by: Dan | Mar 8, 2013 6:27:46 PM

Meanwhile, I did find that Drew Brees during the off-season is a resident of San Diego, California.

Maybe so he can golf with Mickelson. Or Mitt?

Posted by: Bob | Mar 8, 2013 7:41:10 PM

Until articles like this can verify their computations rather than just making a statement that is not supported by any detailed analysis (for example did they adjust for state and local taxes being deductible for federal taxes?) no one who is a tax professional or knowledgeable about taxes should take them seriously.

Really, no one.

The analysis may be correct, but the absence of detail suggests that it is not, that it would not withstand scrutiny.

Posted by: David R. | Mar 9, 2013 6:09:10 PM