Taxes

Caitlin Clark’s Other Audience: State Tax Departments

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Caitlin Clark’s Other Audience: State Tax Departments

























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When Caitlin Clark and Angel Reese made their WNBA preseason debuts, basketball fans across the country tuned in—or at least tried to, with controversy ensuing when the league did not stream the Chicago Sky’s preseason opener. But there’s another audience that also follows along: state revenue officials, who will expect their piece of the pie each time these star athletes—and their teammates—come to town.

So-called “jock taxes” are a fact of life for athletes and entertainers. But here’s the thing: Clark and Reese both have rookie salaries of about $75,000, yet they’re on the hook to file in every income-taxing state they visit under the same rules that apply to, say, Steph Curry, who brings in about $52 million a year.

Now, if these were the rules for everyone, then so be it. But they’re not: athletes and entertainers face stricter requirements for paying nonresident income taxes than the rest of us do. We can debate whether that’s fair to begin with, but there’s at least very little doubt that the best-compensated athletes and performers can afford to have someone handle the paperwork.

Applying the more stringent rules to athletes with $75,000 salaries? That’s more tendentious. And while Clark and Reese will make multiples of their salaries in endorsement deals, many of their teammates will not. They’ll still face the taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities.
filing complexity we normally associate with jet-setting multimillionaires.

What about elsewhere in the sports world? Last year, minor league baseball’s minimum salaries increased dramatically—all the way to a minimum of $19,800 for rookie ball, and $27,300 for High Class A. (Rookies used to get as little as $4,800, though most new players also receive modest signing bonuses.) These minor league players are also required to file in every state in which they play—facing the same “special” rules as, say, Aaron Judge.

Increasingly, states are adopting “mobile workforce” rules under which nonresidents are not obligated to file and remit income taxes—which may literally be just a few dollars—if their visits are brief or the income earned there is low. Such policies dramatically reduce tax complexity while only minimally reducing state tax revenue. They also reduce administrative costs for states, which don’t gain much by processing such trivial returns. But even when states adopt these policies, they exempt athletes and performers (and also typically use special rules for allocating their income). Perhaps that makes sense where NBA, NFL, MLB, and NHL players are concerned. Maybe someday, with the help of audience-building stars like Clark and Reese, WNBA salaries will also reach such heights.

But if a state would normally exempt a nonresident taxpayer who only spent a few days in the state, should the prospective taxpayer’s mere status as an athlete or entertainer revoke the exemption, even for someone on a rookie ball salary, or someone just launching a music career? Or how about athletic staff? States tend to lump professional athletic staff in with athletes themselves in receiving worse treatment, and do so across the board, as if there’s no compensation differential between being on the staff of the Single-A Salem Red Sox or coaching their better-known cousins in Boston.

If states are to continue imposing special rules on athletes and entertainers, they could at least consider an income threshold. Nothing about their situation justifies treating low-compensated athletes and entertainers less favorably than other earners. States should narrow the scope of their exemptions and let standard—and hopefully more taxpayer-friendly—rules prevail.

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