It's Tax Day (in case you didn't know), and both in honor of the occasion and because you might be feeling a bit down about all the cash you're sending Uncle Sam's way, we thought a lighthearted and (hopefully) entertaining post was certainly in order. At the end of the day, we can all take solace in the fact that even Super Bowl MVPs pay taxes. And their bills are far larger than yours or mine.
Joe Flacco had it all. After taking what many perceived to be a big risk in not working out a contract extension prior to the 2012 season, the Baltimore Ravens franchise quarterback led his team to victory in Super Bowl XLVII, was named MVP of the game, and reached a reported six-year $120.6 million deal a month later.
Flacco therefore became the highest-paid player in NFL history, earning $20.1 million per season. Or so everyone thought, until Americans for Tax Reform broached the issue of income taxes. The organization reported that Flacco would have to pay a combined marginal income tax of 51.98%, in light of separate levies from the federal government, the state of Maryland, and Baltimore County. While people were quick to point out that Flacco’s primary residence is in New Jersey, not Maryland, the resulting adjustment only served to raise his overall tax liability 0.39% to roughly 10.53 million annually.
Flacco, as it turns out, likely makes less after taxes than both New Orleans Saints QB Drew Brees and Dallas Cowboys QB Tony Romo. He also could have saved roughly $1.81 million annually ($10.86 million over the life of his contract) if he’d signed with the Cowboys, the Tampa Bay Buccaneers, the Jacksonville Jaguars, or the Tennessee Titans – all of which are based in states that do not charge income taxes.
That got us thinking: To what extent do tax rate differences impact athletes’ contract negotiations and decisions about where to sign in free agency?
We turned to a few leading sports management experts for answers, and here’s what they had to say:
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So, while taxes may contribute to the contractual decisions made my high-profile athletes, a variety of other factors ranging from cost-of-living differences to visitor taxes to comfort and team talent are clearly in the mix as well.
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