State Tax Snapshot: NFL Draft and Taxes—Does it Pay to be Number Two?

On April 25, as football fans everywhere were eagerly awaiting the start of the 2013 NFL Draft, ESPN “Insider” Adam Schefter tweeted an anecdote interesting for NFL fans and tax gurus alike: because Florida has no income tax, the 2nd pick in the draft would actually end up with more after-tax income than the 1st overall pick, despite the rigid rookie wage scale, enacted in 2011, which ensures that players are paid according to their draft position.

While this scenario could be possible any time the Jaguars, Dolphins, or Buccaneers select a player, this year it became especially relevant because the situation arose at the very top of the selection process, where players earn multi-million dollar contracts, and because of the prestige of being chosen to be the first overall selection.

An analysis of Adam Schefter’s assertion by PolitiFact Florida rated the factoid as “Mostly True,” estimating that the 2nd pick, Luke Joeckel, will end up taking home about $285,000 more than the top pick, Eric Fisher, who will be paying Missouri’s 6 percent income tax, plus an additional 1 percent tax for Kansas City.

But when it comes to taxes—and many NFL draft picks—things aren’t always as they seem.

PolitiFact was quick to point out that although the difference in how Missouri and Florida tax income is readily apparent, several other factors will affect the players’ after-tax income. For example, although Florida does not have an income tax, the per capita property tax burden in Florida is nearly 57% higher than in Missouri, according to Bloomberg BNA’s slideshow of the “Most & Least Taxing States 2013.” For someone with millions to invest in a home, property taxes could significantly affect after-tax income.

A further complication is the “jock tax,” a colloquial reference to the tax that several states impose on nonresidents against income earned while in the state. Athletes are particularly easy targets, because their large salaries justify the administrative burden of taxing nonresidents who only work in the state for a few days per year, and because their public schedules clearly indicate when they were in the state. 

Thus, if Joeckel plays more games in states that impose jock taxes than Fisher, it could offset some of the benefit Joeckel realizes from not having to pay Florida income taxes.  According to Tax Foundation, all but 5 states and the District of Columbia impose a jock tax, which means that 24 of the 32 NFL teams play in states that have some form of the tax.

However, one aspect of the situation is clear: once they sign their contracts, both players should have plenty of money left over regardless of which state they call home.

By Michael Kerman

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