Baseball’s Highest-Paid Players Face Huge Tax Bills for Travel

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By Ryan Prete

Major League Baseball players travel a lot.

MLB players face fatigue and risk of injury with all the travel time. But another less-discussed headache is the tax burden baseball players face from scores of trips to other states.

One hundred and sixty-two regular season baseball games means 81 away games for baseball players. That’s roughly three months of travel. For comparison, there’s only 82 games played in an entire professional basketball or hockey regular season. The National Football League? Only 16 total games.

In light of MLB’s first regular season pitch on March 29, Bloomberg Tax analyzed travel schedules for the highest-paid players in each of the MLB’s six divisions to illustrate the tax burdens at stake:

  •  Mike Trout (Los Angeles Angels, American League West): $34 million salary; pays $245,143 in jock taxes
  •  Clayton Kershaw (Los Angeles Dodgers, National League West): $34 million salary; pays $329,176 jock taxes
  •  Miguel Cabrera (Detroit Tigers, American League Central): $30 million salary; pays $583,251 in jock taxes
  •  Jake Arrieta (Philadelphia Phillies, National League East): $30 million salary; pays $563,454 in jock taxes
  •  David Price (Boston Red Sox, American League East): $30 million salary; pays $430,274 in jock taxes
  •  Jon Lester (Chicago Cubs, National League Central): $27.5 million salary; pays $570,230 in jock taxes
Taking into account federal and state income taxes, as well as other fees, each division’s highest-paid player walks away with an average of 51.3 percent of his original salary.

Jock Tax Travel

Every professional athlete is subject to jock taxes, which are calculated by the amount of time a player contributes to “income-related work” in any state that administers an income tax. The time is measured in “duty days.”

The jock tax is calculated by taking the amount of time a player spends in another state and dividing it by the total amount of income-related work days, which start at the beginning of spring training in every state besides Arizona—which hosts half of the league’s spring training.

States without an income tax don’t collect a jock tax. This includes Florida, which hosts the other half of the league’s spring training.

Players receive a tax credit from their home state on jock tax totals to avoid double taxation.

Player Differences

Unlike most income taxes, which increase as a person’s income grows, jock tax totals depend heavily on a state’s income tax rate.

For example, despite making $6.5 million less than center fielder Mike Trout, pitcher Jon Lester pays more than twice as much in jock taxes.

Jon Lester plays 10 away games in California—home to the highest income tax rate at 13.3 percent—which cost him over $165,000. Lester also owes nearly $100,000 for 10 away games in Wisconsin, which has a relatively high tax rate of 7.65 percent.

Trout plays 16 away games against other California teams, but he isn’t hit with a jock tax because he already pays California’s state income tax rate. Trout also plays 20 away games in Texas, which doesn’t impose a state income tax.

Trout and three-time National League Cy Young Award winner Clayton Kershaw inevitably will owe hundreds of thousands more in state income tax than their other highly paid peers.

Two-time American League MVP Miguel Cabrera pays more in jock taxes than the others for a number of reasons. He plays 10 games in Minnesota, which has the second highest state income tax rate of 9.85 percent. The travels costs Cabrera over $130,000 in taxes. And six away games in California result in over $100,000 in taxes due from the first baseman.

Burdens of Team Staff

Jock taxes aren’t exclusive to athletes. All employees that travel with professional sport organizations are subject to jock taxes, according to Sean K. Packard, tax director at Octagon Financial Services in Virginia.

Professional sport team employees include coaches, trainers, equipment managers, scouts, and others. Packard told Bloomberg Tax that the real burden for traveling staff isn’t the money owed to each state, but the fees for preparing their often complicated taxes.

Other Taxes, Fees

All professional athletes also are subject to standard federal and state income taxes. Because the MLB minimum salary is set at $545,000, all players will fall into the top federal tax bracket of 37 percent. Among Trout, Kershaw, Cabrera, Arrieta, Price, and Lester, state income tax rates range from 3.07 percent to 13.3 percent.

Players are subject to agent fees, which average around 3 percent of a player’s salary, according to Packard. High-income individuals making more than $200,000 are subject to a 0.9 percent Medicare surplus tax.

To contact the reporter on this story: Ryan Prete in Washington at rprete@bloombergtax.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

Copyright © 2018 Tax Management Inc. All Rights Reserved.

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