TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, June 14, 2013

Taxes and the NBA and NHL Finals

A reader sent me a note about the NBA Finals and NHL Stanley Cup Finals:

NBA FinalsNBA Finals:  The Miami Heat (founded in 1988) and San Antonio Spurs (1976) are in two of the nine states without an income tax. I have previously mined this topic in:

See also:

NHLNHL Stanley Cup Finals:  The Boston Bruins and Chicago Blackhawks -- two of the NHL's Original Six franchises -- are in two of the highest tax states: Illinois and Massachusetts are tied with the fourth highest individual federal, state, and local tax burden.

See also:

Celebrity Tax Lore, Tax | Permalink

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The Tax Foundation figures on high vs. low tax states are the wrong ones to use for this purpose. They do not compare the tax burden borne by an individual with a given income in two states; rather, they compare the total burden borne by residents of those states, taking into account the progressivity of the federal income tax. Massachusetts and Illinois are classified as "high-tax" states because they have a large proportion of high earners who are subject to higher overall rates of federal income tax. But for a given individual making a decision about where to live (or more to the point, play basketball or hockey), the tax burden borne by other residents of the state is not particularly relevant.

By far the most significant driver of state tax burden for a high-earning athlete is the state's top marginal income tax rate. Both Massachusetts and Illinois have rather low income tax rates for top earners (5% in Illinois and 5.25% in Massachusetts). Concededly, those rates are higher than zero (TX and FL), but they are lower than those in CA, DC, GA, LA, MI, NC, NY, OH, OR, and WI. (Caveat: DC has no commuter tax, and I'm not sure how they deal with nonresident athletes.)
So from an athlete's perspective, it would be fairer to categorize Massachusetts and Illinois as in the middle of the pack in terms of tax burden.

-- Matt

Posted by: Matt | Jun 14, 2013 6:38:39 AM