Odd Headline of the Day: Golf Edition
Forbes wins the day with "Phil Mickelson Wins British Open---And California Taxes It."
Forbes wins the day with “Phil Mickelson Wins British Open—And California Taxes It.”
Phil Mickelson’s come-from-behind win in the 142nd British Open Championship at Muirfield Golf Links in Scotland was decisive. The prize money of £945,000 ($1.43M) is nice, but the big money will be in Mr. Mickelson’s brand extension. See Mickelson’s Brilliant British Open Win Will Pay Off Away From Links. And as long as Mickelson remains a California resident, the state will get a piece of it all.
Well . . . yeah? I mean, if he lived in Florida and California were taxing earnings from the UK, it would be news. But it’s customary for states in which one resides to take a chunk of one’s earnings in order to pay for things like roads, schools, prisons, and various public services.
The report’s author, Robert W. Wood, is flummoxed that Michelson still lives in California, given its high tax rates and his own complaints about same a while back. Also, Forbes apparently sees this as an opportunity for a link dump.
Most states and countries tax athletes and entertainers when they play or perform within their boundaries. Foreign athletes and entertainers must file U.S. income tax returns and face special withholding rules. U.S.-source income generally includes pay for performances, endorsements, merchandise sales, and royalty or other income closely related to the event. See IRS Sand Trap For Pro Golfers.
But as a California resident, California gets a piece of it all. If Mickelson’s advisers work on him to move as seems likely, one might expect him to simply move rather than talk about it. Tiger Woods admitted that he moved to Florida in the 1990s, in part due to California’s high taxes. See Tiger Woods admits he left California because of tax rates.
That was before California passed huge retroactive tax increases in November 2012. California’s Proposition 30 increased state tax rates for those earning $250,000 to $300,000 a year to 10.3%, up from 9.3%. For $1 million-plus-earners, California’s rate is 13.3%, up from a prior top rate of 10.3%.
By comparison, the combined state and local top rate in New York is 12.7%. Combined with federal rates and even sales taxes, the mix is causing some even outside the professional sports stratosphere to think critically about where to live. Although Florida and Texas are both attractive no-tax states, there is debate about how large an impact taxes have on moves even by high income taxpayers. See The Myth of the Rich Who Flee From Taxes.
One report claims that jobs, housing costs, family ties and climate are more important. Even wealthy taxpayers generally don’t move for tax reasons, the report claims. See Trends in New Jersey Migration: Housing, Employment, and Taxation. See also Tax Flight Is a Myth. Yet for a professional athlete, especially one not tied to a team, it seems hard to support.
Given how much he’s on the road—and how much he earns—it would be perfectly reasonable for Michelson to choose a domicile based on taxes. It’s not like he couldn’t have a second (or seventeenth) home in San Diego if he wanted. Then again, just because he’s occasionally frustrated by the prospect of being a target for tax hikes, he might actually like it there and be begrudgingly willing to pay for the privilege.