Joe Flacco Not Highest Paid Player (After Taxes)?

The Ravens quarterback cashed in after winning the Super Bowl. Now it's Maryland's turn.

joe-flacco-mickey-mouse

Baltimore Ravens quarterback Joe Flacco signed what is ostensibly the richest contract in NFL history after winning the Super Bowl. One analysis says that, because of Maryland’s high taxes, he’s not the highest paid player.

The Ticket (“Joe Flacco not the highest paid NFL player—after taxes“):

NFL quarterback Joe Flacco this week signed a new contract with the Baltimore Ravens worth $120.6 million over six years, making him the highest-paid player in the league’s history. But because the Super Bowl MVP plays in Maryland, a state with a 51.98 percent marginal income tax rate, Flacco won’t necessarily take home the most cash in the NFL.

That honor, according to an analysis by Washington-based Americans for Tax Reform, will go to New Orleans Saints Quarterback Drew Brees, who last year signed a five-year $100 million contract to play in Louisiana, a state with a combined federal and state tax rate of 49.4 percent. After taxes, Brees actually will take home $470,000 more than Flacco every year. (The analysis is based on player salaries, and does not take bonuses, endorsements and other sources of income into account.)

Had Flacco been offered the same deal with the Dallas Cowboys, the Tampa Bay Buccaneers, the Tennessee Titans or the Jacksonville Jaguars, teams that play in areas with no state tax burden, he would earn about $1.72 million more per year, ATR says. By playing for the Ravens, Flacco will shell out an estimated $10.44 million annually. After six years of paying state and local taxes in the Baltimore area, Flacco will earn a salary of $52.32 million—$10.32 million less than if he had played in states without an income tax.

But that doesn’t tell the whole story, as  ATR acknowledges:

By choosing to remain a Raven, Flacco is now set to pay a combined marginal income tax rate of 51.98 percent. This overwhelming tax rate is composed of the federal, Maryland, and Baltimore County income tax rate, as well as the Medicare tax. And that’s excluding his “jock tax” liability for away games – play the Patriots at Gillette Stadium, pay Massachusetts income tax on earnings for that game – and other taxes levied against him such as Maryland’s property tax.

There’s a reason so many top athletes make their offseason home in Florida or Texas, the most attractive of the nine states that don’t have a state income tax. But that only shields their non-salary income, plus whatever income is earned in the state.

But, of course, it’s not like those states don’t need operating revenues. Rather than taxing income, they have extremely high sales and property taxes. So, looking only at income tax doesn’t really tell us much.

(I’m going to give ATR the benefit of the doubt and assume they didn’t apply the top marginal rate to all of Flacco’s earnings, since it doesn’t work that way.)

While it’s always struck me as outrageous, most cities manage to tax a portion of visiting players’ salary for the “work” there playing an away game. Since that means the state where the player actually lives and receives services doesn’t get the money, the practice has become widespread.

FILED UNDER: Economics and Business, Sports
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. wr says:

    And if Brees decides to spend $75 million on a yacht, does that mean he’s only being paid $25 million?

    According to the morons at ATR, it must. Because to them, income doesn’t count as income if you spend it on something — in Flacco’s case, on the choice to live in Baltimore, and thus pay takes there.

    Tax fanatics keep getting dumber and dumber. I guess that’s the only way they can notice how thoroughly the tax code rewards the wealthy and penalizes the poor.

  2. PJ says:

    78% of NFL players are either broke or under financial stress two years are having retired.

    Seems that most active players should stop caring about what tax rate they are currently paying and worry more about how to keep the money after they have retired.

  3. C. Clavin says:

    But, but, but..he’s the 1%…the job creators…we can’t tax them…it will destroy the economy.

  4. J-Dub says:

    I also live in Baltimore County and am getting further “taxed” due to Flacco’s new contract because my season tickets just went up 10%. Not to mention all the money I spent in New Orleans which was also his fault.

  5. Console says:

    I can’t fully speak on Maryland, but you aren’t usually double taxed for income earned out of state. I mean, you officially are, but you tend to be able to deduct the taxes paid to another state.

  6. Rafer Janders says:

    Had Flacco been offered the same deal with the Dallas Cowboys, the Tampa Bay Buccaneers, the Tennessee Titans or the Jacksonville Jaguars, teams that play in areas with no state tax burden, he would earn about $1.72 million more per year, ATR says.

    Had he been offered the same deal by them, yes — but he warn’t, Blanche, he warn’t!

    “Had other people offered to pay him more money, he’d have more money.” True, yes, but fairly idiotic in terms of analysis.

  7. anjin-san says:

    Clearly, we need to raise taxes on poor people. This is very unfair to Flacco. I’m surprised he has not moved out of the country.

  8. Drew says:

    @Console:

    This is generally correct. I lived in CT but worked in NY for years. You pay NYS income taxes with an offset to CT. In the NJ, NY and CT tri-state this is common, especially with the high comp levels of NY what with Wall Street and sports and entertainemnt.

  9. Drew says:

    @anjin-san:

    Yes, clearly we should let people feed at the trough of the rich, voting other people’s income to themselves without bound. After all, how do afford a 60 inch TV to watch Jerry Springer?

  10. Drew says:

    @C. Clavin:

    Have you ever considered that it is a free will decision on the part of the Average Joe to buy an (overpriced, my words) ticket or buy the products that fund Mr. Flacco’s salary? Its not compulsory.

    Ever compared the salaries of US soccer or WNBA players to the NBA or second rate first basemen?

    Its the market. I’ll pay through the nose to watch Patrick Kane and Tazer and Sharpie. Derrick Rose? You bet. A faux Bears team? Not so much.

    Get a clue.

  11. Tsar Nicholas says:

    But, of course, it’s not like those states don’t need operating revenues. Rather than taxing income, they have extremely high sales and property taxes. So, looking only at income tax doesn’t really tell us much.

    FYI, believe it or not, Texas’ and Florida’s state sales tax rates, despite not having any state income taxes, are less than the likes of California’s, Connecticut’s, New Jersey’s and Rhode Island’s. Think about that for a few moments.

    Florida doesn’t have high property taxes. Theirs are middle of the road, but actually are below average. Texas, indeed, however, has very high property taxes. But of course that’s based upon home values, not based upon income levels. In Texas there’s no state-level disincentive to earn more income. And Texas’ high property taxes are small prices to pay when you factor in the absence of state income taxes, along with relative costs of living, pro-growth policies, minimal regulations, etc. After all it’s not a coincidence that Texas’ unemployment rate is sooooo much lower than the likes of California’s, Connecticut’s, Rhode Island’s, New Jersey’s and for good measure New York’s, despite the rapid expansion of Texas’ population and its measured workforce.

    In any event, taxes are a four-letter word. For everyone. From Al Gore to Joe Flacco, to Warren Buffett and Wesley Snipes, and everyone in between. Even those who don’t pay any net income taxes are not exactly fans of taxes. Nobody is that dumb.

  12. Gromitt Gunn says:

    This article is engaging is a set of really tortured assumptions to make its point. The only way that Flacco’s tax burden would be at the Cowboys level or the Jaguars level is if he both lived and worked in that state. If he lived in Texas but worked in Maryland, he would have to pay Maryland state income tax on his entire Ravens salary (except for the away-game offsets) because he would not have any Texas state income tax to offset his non-resident Maryland tax liability. The same thing would be true if he lived in Baltimore but played for the Cowboys – he would not have any non-resident Texas state income tax to offset the resident Maryland burden.

    In general, states in the US use one of two three-legged stools to fund the bulk of the individual taxpayer portion of their revenues: personal income tax / personal property tax / personal sales tax or personal usage fees / personal property tax / personal sales tax (New Hampshire is one exception – they rely almost entirely on property tax). The states that use an income tax tend to roughly balance out the respective regressive and progressive aspects of the sales and income taxes and rates on the two tend to be similar. The states with no income tax tend to have higher property and sales tax rates since usage fees can not offset income tax.

    So, really, if one is going to live and work in different states, the best thing to do from a tax planning standpoint to pick two jurisdictions that use the same stool. Otherwise you end up paying both state income taxes and high property taxes and sales taxes.

  13. C. Clavin says:

    @ Drew…
    You are right…I have no clue…how anything you typed applies to anything I typed.
    But your delusions have always confused me…so all is right with the world.

  14. C. Clavin says:

    In spite of my snark re: the mythical 1% Job Creators…good on Mr. Flacco…he put together a hell of a run and I enjoyed watching it.

  15. Gromitt Gunn says:

    @Tsar Nicholas:

    FYI, believe it or not, Texas’ and Florida’s state sales tax rates, despite not having any state income taxes, are less than the likes of California’s, Connecticut’s, New Jersey’s and Rhode Island’s. Think about that for a few moments.

    Other than California (which is the outlier on the other tail opposite from New Hampshire), this is only true if you consider the total sales tax burden to be the state-mandated rate and ignore local sales tax allowances. In both Texas and Florida, local governmental taxing districts are allowed to assess additional sales taxes up to a total cap of 8.25% in Texas and 7.5% in Florida, which the inevitably do. The de facto sales tax rates throughout Texas and Florida are higher than the maximum sales tax rates in CT, NJ, RI, MA, MD, and MI.

  16. anjin-san says:

    @ Drew

    Before you get your hankie out, you might want to look up what tax rates on 1%ers were under that noted communist, President Eisenhower.

    My household income is in the top 10%, we are paying more taxes than most of the people in this country. The difference between me and you is I don’t whine about it.

  17. Gromitt Gunn says:

    @Tsar Nicholas:

    And Texas’ high property taxes are small prices to pay when you factor in the absence of state income taxes, along with relative costs of living, pro-growth policies, minimal regulations, etc. After all it’s not a coincidence that Texas’ unemployment rate is sooooo much lower than the likes of California’s, Connecticut’s, Rhode Island’s, New Jersey’s and for good measure New York’s, despite the rapid expansion of Texas’ population and its measured workforce.

    We’ve determined here before that unemployment rates don’t track the red state / blue state or high tax / low tax divide. Here is the US unemployment data by state for 2012. As you can see, Texas comes in tied for 17th out of 51 jurisdictions, while Vermont, Iowa, Minnesota, Hawaii, Massachusetts and Maryland all have 2012 unemployment rates equal to or lower than Texas. As you note, another set of high tax states / blue states are on the other side of Texas. All that this objectively shows is that Texas’s environment put its 2012 unemployment rate in the second quartile. Being above average is great as far as it goes, but “We’re #17!” isn’t exactly a rousing battlecry.

  18. carpeicthus says:

    I’m not sure people understand what “paid” means.

  19. C. Clavin says:
  20. Geek, Esq. says:

    The local city and state pay for the infrastructure (roads, water, sewage, etc) that make NFL games possible–including oftentimes the stadium itself–so yeah they should get a cut of the money made by people at the game.

    If the guy busting his butt running up and down the stairs selling beer gets taxed, why shouldn’t the punter?

  21. anjin-san says:

    The local city and state pay for the infrastructure (roads, water, sewage, etc) that make NFL games possible

    It goes beyond that. Most cities with NFL teams subsidize the stadium the team plays in, often via sales tax. So the guy who could never afford to go to a game is subsidizing the billionaire who owns the team and the millionaires who play on it.

    Its worth noting that the only business success GW Bush ever had was the construction of Arlington Stadium, which was underwritten by a sales tax hike. The stadium increased the value of the team, and when Bush sold his interest, he made out like a bandit. Pity the poor #1…

  22. superdestroyer says:

    I think Flacco actually lives in Delaware where he went to college. After signing his contract he was spotted at a McDonalds in Aberdeen Maryland which would have been the route from Baltimore to Delaware.

    Flacco still has to pay Maryland taxes on his pay but probably lives in Delaware for his non-football income purposes.

  23. al-Ameda says:

    I’m saddened by Joe Flacco’s loss.

  24. SC_Birdflyte says:

    @Rafer Janders: Had he been offered the same deal by one of those teams, he could’ve said, “No thanks. I’d rather have a second Super Bowl ring than pay your lower taxes. People will remember that long after my taxes have been spent.”