The election of Barack Obama to a second term as President of the United States has some baseball agents posturing about how their players will be affected economically (via taxation) and team executives responding in kind. Recently, Ronald Blum of the Associated Press spoke to several baseball influencers who opined on the subject with differing responses.
On one end of the spectrum was baseball agent Greg Genske of The Legacy Agency, who emailed Blum,
“Front-loading would make sense if at all possible as tax rates will definitely go up on January 1st on all high-income taxpayers. The only question is HOW MUCH will the rates increase????”
Baseball agent Craig Landis of Landis Baseball Group, LLC did not seem convinced that tax rates will play a huge role in contract negotiation. He said,
“It’s a factor, maybe even a small factor. If there’s 50 variables, you can now make it a 51st. It’s not usually going to be the drive, but it’s something to consider.”
And then Billy Beane, general manager of the Oakland Athletics and a main focus of the movie, Moneyball, stated,
“I think if you’re hopping around the potential of tax reform, you’re probably chasing your tail. If they can predict when something’s going to happen, then they’re much further ahead than the lawmakers.”
Beane’s statement should be respected. A lot can (and probably will) change concerning tax reform prior to the start of the new year, so the panic (maybe better to call it “concern”) may be misplaced. However, if an analysis conducted by a tax lawyer at Boras Corp. is correct, then may be there is a cause for concern. As noted by Blum,
According to an analysis done by a tax lawyer on the staff of agent Scott Boras, a player with a $10 million salary and average deductions who plays in Florida and is a resident of that state will see his taxes rise from $3.45 million this year to $4.09 million next year under current law. If traded to the Blue Jays, that player’s 2013 tax would rise to $4.27 million. And if dealt to a California team, the tax would go up to $4.4 million.
One reply on “Baseball Agents Expressing Concern Over Anticipated Tax Increases”
Mr. Heitner,
First off, I would like to thank you for bringing light to an important, current topic in the professional sports realm. I think this situation really demonstrates the difficulties posed to all parties involved in contract negotiations. To me, professional athletes almost possess an aura of invisibility that protects them from the conflicts and struggles that everyday people face; however, your post proves that the 2012 Presidential election really had some serious consequences for even some of the highest paid athletes in the world. That said, I am primarily concerned with the feasibility of the proposed front-loading of player contracts. I know that there is no salary cap in Major League Baseball, which explains why certain teams expend significant amounts of fiscal resources to attract top talent. But do agents have the same kind of flexibility in regards to contract specifics? Can they really negotiate to get their players more money as signing bonuses, while having them earn less in future years just to avoid larger tax payouts? I see this is as somewhat of a sneaky move, reminiscent of tax evasion committed by large corporations. But, if it is allowed under current MLB regulations, it makes sense why agents would want to save their clients as much money as is legally possible.
On the flip side, however, what makes these athletes any different from those who work on salary for businesses? Obviously, there is a lot of money at stake in professional sports. But I think it is ridiculous that, if allowed, these players can shuffle around the money on their salaries so that they can avoid having to pay higher future taxes. If anything, these players are already making millions of dollars and are in the spotlight on a daily basis. Do we need to feel bad for them? Should they not be expected to pay the same taxes as everyone else working on salary? I also feel that since certain states do not collect income taxes, the practice of trying to manipulate tax rates could have negative side effects. This could produce an inherent conflict between money generation and being a team player – will certain athletes choose to play (or not play) for teams in certain states because they are taxed less? If a player is traded to a team in a state with high tax rates, will players feel more at ease in refusing to play for that team? With the vast amounts of money that these athletes already make, I feel that giving them and their agents more freedom could lead to significant problems in Major League Baseball. Overall, this issue is important as it affects the lives of each and every agent and player negotiating for contracts this offseason. I just hope that players make sound choices regarding why they decide to play for a certain team, and similarly, that agents work within their confines in getting their clients as much money as possible. Thanks again for raising awareness on a timely topic in the professional sports world.