It’s the day after the big game and there are plenty of story lines to talk about. The phenomenal defensive stand by the Seahawks and the Broncos’ offense not being able to click are the most obvious ones. Then there are more complex debates such as the NFL hosting the championship game in cold-weather stadiums. This topic has been contested throughout the past two weeks; some say the aesthetics of a snow ball make for a great game, others believe that the Super Bowl is a corporate love fest and that it’s easier for the league to woo sponsors in warm weather. But there is another reason why cities in the southern United States are called upon more often than their northern counterparts: taxes.
It may not seem like a big issue, but trust me, tax rates are a huge player in how the league determines where the game should be hosted. Yesterday’s game was played in East Rutherford and, for the most part, I chalk that one up to the fact that NY is a massive marketplace and the stadium is relatively new. The NFL has consistently chosen new stadiums to host the dance (e.g., Ford Field, University of Arizona Stadium, AT&T Stadium, Lucas Oil Stadium) and have future games already set for new stadiums (i.e., Levi’s Stadium, Reliant Stadium). But there is a reason why the state of Florida has hosted the game 12 times…it’s because the players don’t have to pay income tax. Yes, that’s right. Income tax. The state of Florida has none for athletes. New Jersey on the other hand is another story. To add insult to injury, Peyton Manning will have to pay $644,000 to the state of New Jersey, a 4.26% tax on his annual salary. Oh, you didn’t think athletes pay taxes? Guess again. Many states have their “jock tax” in the 7-9% range, and it’s not just New Jersey who has that. From California to New York, athletes are taxed regardless of whether they’re on the home team or the visiting team. So, if I play for the Houston Texans, not only do I have to file income tax for the state of Texas, but I must claim income from all the states I’ve played in (e.g., if I go to play the Jets in New Jersey). This has massive implications for the players and the league wants to appease the players union, one of the more important stakeholders.
There’s an article floating around on the web that talks about how the “jock tax” stems from Michael Jordan and his Bulls. Apparently back in 1991, Jordan had the audacity to travel to the Forum in LA and beat the Lakers. As a result, the state of California applied out-of-state taxes against his Illinois tax return. In spite of these moves, the state of Illinois began taxing athletes who came to play games in their state. The trend didn’t stop at states, either. Individual cities like Philadelphia and Detroit have placed levies on athletes who come to town and earn income.
At the end of the day, athletes are earning a wage just like other individuals who are employed. The difference is their salaries are much larger and they are prone to claiming income from multiple jurisdictions which is costly, time-consuming, and more than anything else, a nuisance. But it’s all dependent on their contracts. By comparison, Russell Wilson will only pay $2,000 in taxes for his win last night, due in large part because he makes way less than Manning. What this story illustrates though is that there is another variable at play when a player signs with a team. If he plays in Florida, he’s not going to pay any in-state income tax, and he’ll only be responsible for his road games. If he plays in NJ, he’s going to pay hand-over-fist.
It’s a complex situation and includes many factors that people overlook. I can tell you I myself never really thought about it until noticing Florida’s 12 hosting gigs versus the others. Weather conditions and corporate sponsorships are definitely important to the conversation, but it’s hard to overlook the tax man. The NFL wants to keep its players union happy so that they can destroy them during collective bargaining negotiations. And if the players are happy, they are less likely to want more coin from their owners. So the next time you hear someone say the Super Bowl should be played there, just ask them, “What’s the tax rate?”
Photo credit: Palmwood Post