For anybody who thinks that professional athletes get paid too much, here is an interesting article from Forbes on the “jock tax.” According to K. Sean Packard, Carolina Panthers quarterback Cam Newton will be hit with a hefty tax bill simply for playing in the Superbowl, located this year in Santa Clara, California. His tax bill will be more than double that of Peyton Manning’s New Jersey Superbowl tax two years ago, thanks to California’s 13.3 percent millionaire’s tax.
How does the jock tax work? In theory, a player must pay state income taxes in each state that he has played a game. But because it is difficult to determine how much an athlete earns in each state, the formula is that the player’s annual salary is multiplied by the number of duty days in a given state divided by total duty days. This is in addition to the taxes they pay on their total annual salary in their state of residence. Thus, athletes would be incentivized to live in states with low or no state income taxes.
The rest of us may argue that athletes are overpaid and therefore, deserve to be taxed to the hilt. But this tax is not necessarily specific to athletes. Technically, any traveling professional who earns money in a different state is required to pay taxes on his or her income in that state (see California’s statute); it just so happens that wealthy athletes are targeted because it much easier to track their duty days and earnings (thanks to their publicly available salaries and schedules) than it would be a traveling businessperson.