Tuesday, July 13, 2004
Just in time for tonight’s major league baseball all-star game, the Tax Foundation has released a 12-page report chronicling the spread of “Jock Taxes” — applications of state income taxes to professional athletes who travel into a state for a day or a few days to play games. As the accompanying press release notes:
“The jock tax began with California trying to get revenge on Michael Jordan and the Chicago Bulls for beating the Lakers in 1991,” said David Hoffman, adjunct scholar with the Tax Foundation and co-author of the new report. “Illinois fought back with a retaliatory tax the next year. Since then, many other states have joined in.” Today, of the 24 states with pro teams, 20 have enacted jock taxes, as have a half dozen cities.
Many cities (like my hometown of Cincinnati) also impose jock taxes — which recently have been extended to visiting lawyers (New Jersey) and skateboarders (Cincinnati).
In a curious application of the term, the Tax Foundation reports that the players in tonight’s game in Houston will incur almost $250,000 in jock taxes — but because Texas does not have an income tax, the calculation is based on income tax rates in the players’ home states. Due to salary vagaries and the residence of some of the players in no-tax states like Florida, Texas, and Washington, the American League will pay roughly 40% more in jock taxes for tonight’s game: $158,000 v. $91,000.
The Tax Foundation calls for the repeal of Jock Taxes on the grounds that they are:
• Poorly Targeted: Advertised as one that hits only ultra-rich athletes, the jock tax has quickly spread to many people with moderate incomes, such as trainers and scouts, and to other professions.
• Arbitrary: Professionals in other occupations with comparable incomes over their working lives, such as doctors and corporate executives, are not penalized by a “doc tax” or “exec tax,” though that is changing.
• Administratively Burdensome: The tax imposes an unrealistic administrative burden on people who have to file more than a dozen state income tax returns.
2 responses to “Tax Foundation Releases Report on “Jock Taxes””
This report by the Tax Foundation borders on the frivolous. They argue that the salaries of these athletes are tied to their home states and not to the states in which they play. I suppose these athletes travel to other states because of sportsmanship and not because they are interested in earning money? It is one thing to argue administrative burdens but to argue that their income is not earned in the states in which they play is frivolous—it detracts from any real argument they might have.
In response to Beau, I don’t think the argument of the Tax Foundation is frivolous at all. Even if team members don’t travel with teams on away games, they’re *still* forced to pay state income taxes in states their team visits. Roger Clemens, for example, stays home in Houston during many games when the Astros travel. But he’ll still get hit with jock taxes.
In what sense does Clemens “earn” his income in those other states, if he never sets foot in them? Not in any economic sense, that’s for sure. Jock taxes have no economically sound basis, and come dangerously close to interfering with interstate commerce.
Besides, the problem of administrative burden is integrally related the aggressive extension of state income taxes to visitors who’s income is only very questionably connected to the time spent in states. That aggresive tax collection from non-residents with no voting power is what’s forcing athletes to file multiple returns come April 15.