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MFFL · 12-22-2002, 11:16 AM

Some states zero in on high-profile tax dollars that are easily collected

12/21/2002

Rich athletes may not be the most sympathetic victims of government's heavy hand.

Yet the Tax Foundation, a nonpartisan Washington, D.C., think tank, contends that America's sports stars are being subjected to excessive and unfair taxation merely because they've got money, possess little political clout and can't "vote with their feet."

According to the foundation, 20 of the 24 states that host big-league franchises are dipping their mitts into the visiting athletes' pockets. Just this week, Cincinnati's City Council voted to apply a 2.1 percent tax to out-of-town athletes, musicians and other entertainers performing there, figuring to raise $940,000 next year. The District of Columbia is considering taxing ballplayers to help pay for a new baseball stadium.

Texas and the other states that don't have an income tax can't impose the so-called "jock tax," but athletes from Texas Rangers All-Star Alex Rodriguez to Dallas Mavericks rookie benchwarmer Adam Harrington will be paying when playing on the road.

In fact, Texas athletes are among the biggest losers in this game. To prevent double taxation, most jurisdictions allow athletes to credit the taxes they pay in other states against their local state income tax. Since Texas has no income tax, the players on Texas' eight big-league teams can't recoup even one cent.

Tax Foundation economist David Hoffman traces the jock tax to 1991, when California decided to extend its income tax to Michael Jordan and the Chicago Bulls after they beat the Los Angeles Lakers for the National Basketball Association championship. The next year, Illinois retaliated with a levy on athletes from states that tax athletes – at the time, just California.

"Professional athletes are a tempting target because they represent a highly concentrated pool of wealth that can be taxed with little enforcement," he said.

Over time, more states started collecting the taxes, some reasoning that their athletes were paying so the state might as well grab the money from visiting players. "It is a pain," said Irving-based sports agent Jordan Woy, who represents 50 athletes. "These players have to file tax returns every place they play and earn money."

Agents' nightmare

Paperwork and record-keeping are nightmares. Often, Woy said, disputes arise over how much of athletes' incomes are earned in different states. Is total income divided by games played or days with the team?

Nobody likes paying taxes – and that certainly includes athletes. What makes the jock tax unfair, Hoffman says, is that it doesn't hit doctors, lawyers, business executives and others who make big salaries and cross state lines to conduct their business. The reason: It would cost too much to find these people and collect taxes from them. Hoffman says enforcement centers on the four big-time leagues in baseball, basketball, football and hockey. Golfers, racecar drivers and minor leaguers usually aren't bothered.

"It's just one particular occupation," Hoffman said. "You know where the players are and when they're playing. They're easy to find."

Athletes' lifestyles aren't likely to suffer without the extra money, but they're not the only ones paying the jock taxes. The same laws apply to minimum-salary players, coaches, trainers, broadcasters and others. Many of them earn middle-class income. Scouts, for example, make as little as $18,000 a year in baseball.

Rodriguez, team sports' highest-paid player at $22.7 million this season, played 56 of his 81 away games in states that impose taxes on athletes. Based on Tax Foundation data, he would owe roughly $550,000 to nine states for this year, plus $8,864 to Wisconsin for the All-Star Game at Milwaukee's Miller Park.

The Rangers shortstop is an extreme example, of course, because no athlete faces a higher jock tax. Hoffman figured the extra taxes for Steve Francis, a Houston Rockets guard who made the National Basketball Association average of $3.4 million last year, at roughly $67,000. Wealthy Texans in other occupations don't pay any income taxes in other states.

Raising revenue

The states and cities that collect the tax, of course, see the jock tax as a way to raise revenue. In the current economic environment, with government budgets squeezed, state and local governments are looking for every source of money they can find.

The Cincinnati tax, for example, was part of a package to close a $35 million gap between expenses and revenue. Councilman David Crowley said the city was just asking the athletes to pay a tax already levied on almost everyone who worked in the city.

The athletes have tried to stifle the taxes, but they haven't scored many victories. "It's taxation without representation," Hoffman said. "It's easy for the governments to say, 'Tax them. They're rich. They don't vote.'"

12-22-2002, 11:16 AM	#1
MFFL Guru Join Date: May 2001 Location: Arlington, TX Posts: 13,136	Some states zero in on high-profile tax dollars that are easily collected 12/21/2002 Rich athletes may not be the most sympathetic victims of government's heavy hand. Yet the Tax Foundation, a nonpartisan Washington, D.C., think tank, contends that America's sports stars are being subjected to excessive and unfair taxation merely because they've got money, possess little political clout and can't "vote with their feet." According to the foundation, 20 of the 24 states that host big-league franchises are dipping their mitts into the visiting athletes' pockets. Just this week, Cincinnati's City Council voted to apply a 2.1 percent tax to out-of-town athletes, musicians and other entertainers performing there, figuring to raise $940,000 next year. The District of Columbia is considering taxing ballplayers to help pay for a new baseball stadium. Texas and the other states that don't have an income tax can't impose the so-called "jock tax," but athletes from Texas Rangers All-Star Alex Rodriguez to Dallas Mavericks rookie benchwarmer Adam Harrington will be paying when playing on the road. In fact, Texas athletes are among the biggest losers in this game. To prevent double taxation, most jurisdictions allow athletes to credit the taxes they pay in other states against their local state income tax. Since Texas has no income tax, the players on Texas' eight big-league teams can't recoup even one cent. Tax Foundation economist David Hoffman traces the jock tax to 1991, when California decided to extend its income tax to Michael Jordan and the Chicago Bulls after they beat the Los Angeles Lakers for the National Basketball Association championship. The next year, Illinois retaliated with a levy on athletes from states that tax athletes – at the time, just California. "Professional athletes are a tempting target because they represent a highly concentrated pool of wealth that can be taxed with little enforcement," he said. Over time, more states started collecting the taxes, some reasoning that their athletes were paying so the state might as well grab the money from visiting players. "It is a pain," said Irving-based sports agent Jordan Woy, who represents 50 athletes. "These players have to file tax returns every place they play and earn money." Agents' nightmare Paperwork and record-keeping are nightmares. Often, Woy said, disputes arise over how much of athletes' incomes are earned in different states. Is total income divided by games played or days with the team? Nobody likes paying taxes – and that certainly includes athletes. What makes the jock tax unfair, Hoffman says, is that it doesn't hit doctors, lawyers, business executives and others who make big salaries and cross state lines to conduct their business. The reason: It would cost too much to find these people and collect taxes from them. Hoffman says enforcement centers on the four big-time leagues in baseball, basketball, football and hockey. Golfers, racecar drivers and minor leaguers usually aren't bothered. "It's just one particular occupation," Hoffman said. "You know where the players are and when they're playing. They're easy to find." Athletes' lifestyles aren't likely to suffer without the extra money, but they're not the only ones paying the jock taxes. The same laws apply to minimum-salary players, coaches, trainers, broadcasters and others. Many of them earn middle-class income. Scouts, for example, make as little as $18,000 a year in baseball. Rodriguez, team sports' highest-paid player at $22.7 million this season, played 56 of his 81 away games in states that impose taxes on athletes. Based on Tax Foundation data, he would owe roughly $550,000 to nine states for this year, plus $8,864 to Wisconsin for the All-Star Game at Milwaukee's Miller Park. The Rangers shortstop is an extreme example, of course, because no athlete faces a higher jock tax. Hoffman figured the extra taxes for Steve Francis, a Houston Rockets guard who made the National Basketball Association average of $3.4 million last year, at roughly $67,000. Wealthy Texans in other occupations don't pay any income taxes in other states. Raising revenue The states and cities that collect the tax, of course, see the jock tax as a way to raise revenue. In the current economic environment, with government budgets squeezed, state and local governments are looking for every source of money they can find. The Cincinnati tax, for example, was part of a package to close a $35 million gap between expenses and revenue. Councilman David Crowley said the city was just asking the athletes to pay a tax already levied on almost everyone who worked in the city. The athletes have tried to stifle the taxes, but they haven't scored many victories. "It's taxation without representation," Hoffman said. "It's easy for the governments to say, 'Tax them. They're rich. They don't vote.'"