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The Income Tax Implications of Bryce Harper’s Choice of Next Team

At some point in the coming days or weeks or months, Bryce Harper, with an assist from Scott Boras, will make a choice as to which team he will sign a contract to play baseball with in 2019, and possibly beyond. A lot of factors will go into what his choice of team will be. It is almost certain that one of those factors will not be the city and state (i.e., local) income taxes he would be paying were he to choose this team or that.

Maybe I have that wrong. Maybe the local income tax burden will be high on a list of factors Harper considers. Maybe he’ll meticulously pore over a table showing each team’s possible effect on his overall tax bill. More likely, though, beyond the idea that a team he’s considering plays in a no-income-tax state or a super-high-income-tax state, I can’t imagine him or Boras actually stressing out over it.

That said, it is worth noting that the difference in local income taxes to be paid by Harper next year would vary widely depending on which team he chooses. And when I say “widely”, I’m talking a difference of millions. Mo’ money, mo’ taxes. Nice problem to have, amirite?

What follows is my attempt to quantify just what this difference might be, by team. Before diving in, two points.

The first point is to dispel any lingering notion that, if Bryce Harper were to choose the Texas Rangers or Seattle Mariners or Miami Marlins—come on now, stop laughing and pay attention, this is kind of important—or any other team in a no-income tax state, he would not have to pay any state income tax at all. That’s not true. In every place that levies income tax in which his team plays games, a ballplayer on a big league roster is responsible for paying them. Regardless of whether he plays 81 games at home as, for example, a member of the Astros in Houston, located in a state with no income tax, when the Astros play their 19 road games in California (top income tax rate: 13.3%), he would owe the Golden State tax on (19÷162 =) 11.7% of whatever his total salary for the year is. Same goes for all the other games in all the other taxing places his team plays in. So no matter what team Bryce Harper plays for, he’ll be paying a boatload in state income taxes to a bunch of states.

The other point is that, regardless of which team Harper ends up playing for, he’s going to pay the same in federal taxes no matter what, which makes sense. Why would his federal tax burden be any different playing in New York versus paying in Tampa Bay? Of course it wouldn’t be. Although you might be surprised to learn that even though one team plays in Canada, which obviously has a different federal income tax scheme than the US does, the tax brackets of the two countries are surprisingly similar, with Canada being even a touch lower at the top end than the US is. So, for this exercise, let’s assume that regardless of what team Harper ends up playing with, his federal tax burden to his team’s country will be the same. As such, our focus is not federal income tax; it’s only local income tax.

OK, now: to get at what the difference in local tax burden would be based given each of the thirty teams Harper could possibly play for, we had to determine how many games each team would be playing in each state in 2019. There are seventeen different states, one province and one District of Columbia (let’s call them all “states” for this piece) that are home to big league teams. Three of these states (FL, TX, WA) collect no income tax at all. Five others (CA, NY, DC, MN, Ontario) impose very high state income tax rates of at least 9% at the top end. The remaining eleven range from about 3% (PA) to 6% (GA). In addition, ten teams play in cities that levy their own income taxes, ranging from 1% (KC, STL) to a top end of 4.25% (NYC). It’s a veritable hodge-podge of Thanks For Playing Here, Now Pay Up.

To put actual numbers on this, let’s assume that Bryce Harper signs on to play for a base salary of $35 million next year. That seems as good a guess as any at this point. Personally, I think he’s probably going to sign a one-year deal for $35 million, tops. Given his inconsistent performance of the past three years, as well as testing positive for injury history, I don’t think he’ll be getting the terrain-adjusting 10/400 deal he and his agent have been craving. I think recency will make teams think twice before committing to him for so much money and so many years, so I can see Bryce wanting a shot at putting up an MVP level season in 2019 so he can get his 10/400, or even better, next winter. I won’t belabor this point anymore, since it belongs in another article anyway. Let’s just say in 2019, one way or the other, Bryce is going to sign for $35 million.

That’s not the income he’s going to be paying tax on—there will be write-offs and exemptions and deductions and the like that his first-rate tax attorneys will find, so let’s say all of that leads to an adjusted gross income for tax purposes of $30 million. That’s the number we’ll use as the basis of Bryce Harper’s state and city tax burden for next year.

Lastly, these tax estimates are based on the actual tax rates each of these states and cities levy on income earners in their jurisdictions, including the application of graduated rates where appropriate (mostly in high tax states, and in New York City). Even so, with only a few exceptions, the vast, vast majority of Bryce Harper’s income will be taxed in all these states and cities at the highest rate available.

Here’s the result, rounded off to the nearest $10,000 to make it easier to take in. Remember, these are not taxes he pays only to the city or state his team calls home—they’re taxes paid to all the jurisdictions he plays in during the season:

Potential Harper Team City Taxes State Taxes Total Local Tax
San Francisco Giants  $ 100,000  $ 3,070,000  $ 3,170,000
San Diego Padres  $ 110,000  $ 3,030,000  $ 3,140,000
Los Angeles Dodgers  $ 100,000  $ 3,000,000  $ 3,100,000
New York Yankees  $ 740,000  $ 2,250,000  $ 2,990,000
New York Mets  $ 750,000  $ 2,180,000  $ 2,930,000
Toronto Blue Jays  $ 160,000  $ 2,770,000  $ 2,930,000
Los Angeles Angels  $  80,000  $ 2,700,000  $ 2,780,000
Oakland Athletics  $ 100,000  $ 2,680,000  $ 2,780,000
Washington Nationals  $ 190,000  $ 2,200,000  $ 2,390,000
Minnesota Twins  $ 150,000  $ 2,180,000  $ 2,330,000
Baltimore Orioles  $ 580,000  $ 1,740,000  $ 2,320,000
Milwaukee Brewers  $ 170,000  $ 2,050,000  $ 2,220,000
Cincinnati Reds  $ 450,000  $ 1,680,000  $ 2,130,000
Cleveland Indians  $ 500,000  $ 1,600,000  $ 2,100,000
Philadelphia Phillies  $ 650,000  $ 1,380,000  $ 2,030,000
St. Louis Cardinals  $ 300,000  $ 1,740,000  $ 2,040,000
Kansas City Royals  $ 260,000  $ 1,720,000  $ 1,980,000
Atlanta Braves  $ 180,000  $ 1,800,000  $ 1,980,000
Pittsburgh Pirates  $ 550,000  $ 1,400,000  $ 1,950,000
Arizona Diamondbacks  $ 110,000  $ 1,810,000  $ 1,920,000
Colorado Rockies  $ 100,000  $ 1,810,000  $ 1,910,000
Boston Red Sox  $ 160,000  $ 1,660,000  $ 1,820,000
Detroit Tigers  $ 340,000  $ 1,490,000  $ 1,830,000
Chicago Cubs  $ 160,000  $ 1,570,000  $ 1,730,000
Chicago White Sox  $ 140,000  $ 1,590,000  $ 1,730,000
Tampa Bay Rays  $ 170,000  $ 1,070,000  $ 1,240,000
Miami Marlins  $ 190,000  $   940,000  $ 1,130,000
Seattle Mariners  $  90,000  $   940,000  $ 1,030,000
Houston Astros  $  90,000  $   900,000  $   990,000
Texas Rangers  $ 100,000  $   890,000  $   990,000

Holy Toledo, is this ever a huge difference. Choosing a California National League or a New York City team, just by itself and independent of anything else, will take an additional $2 million out of Bryce Harper’s pocket than choosing the Houston Astros. Are you scared yet, Yankees/Red Sox/Indians/Angels/A’s fans?

Now, to be clear, it’s not as though we should cry for Bryce Harper because of his heavy tax burden. Bryce Harper has been a multimillionaire ever since he was 17 years old. He is a very rich young man who is on his way to becoming a very wealthy young man. (If you’re unclear on the difference between being “rich” and being “wealthy”, here’s a very entertaining and very NSFW tutorial.) So let’s not feel as though we need to light any novena candles on behalf of Bryce Harper.

By the same token, even for a man as rich as Bryce Harper, $2 million is not nothing. It’s decidedly something. And remember, that’s $2 million based on one year of Bryce’s salary alone. Over the course of the kind of ten-plus year contract he’s looking for, that could well add up to over $20 million in wages lost just to local taxes, for no other reason than he might choose playing for the Dodgers over playing for the Astros. Or over playing for the Rangers or Mariners or Marlins.

You can laugh about that last one now, because math class is over.

Chris Davis’s Oddly Historic Season So Far

A lot of ink (and pixels) have been spilled about Chris Davis’ great season.  It’s hard to overstate just how great a .337/.432/.721 start through roughly one-third of the season is, especially in this renewed era of depressed offense.  MLB’s .722 OPS this year so far ranks it as Baseball’s second-lowest since 1992’s .700.  (2011 = .720)  Quite straight, Davis is having the best offensive season in the American League of any player whose first name is not some variation of “Michael”.

Here’s yet another data point for you to chew on: Chris Davis is on track to have one of the highest extra-base hit (XBH) to plate appearance (PA) ratios in history.

As of the morning of Memorial Day 2013, Davis has hit an XBH in 16.5% of his PAs.  In conversational terms, he hits an XBH about every six times he steps to the plate.

If Davis were to end the season with this ratio and qualify for a batting championship, it would rank second in history behind this other guy’s pretty good season.

In fact, only nine qualified players in modern history have ever had an XBH-PA ratio of greater than 15% over the course of an entire season.  Here is the list, with Davis’s 2013 added for context:

Rk Player Year XBH PA XBH %
1 Babe Ruth 1921 119 693 17.2%
2 Chris Davis 2013 34 206 16.5%
3 Albert Belle 1995 103 631 16.3%
4 Lou Gehrig 1927 117 717 16.3%
5 Barry Bonds 2001 107 664 16.1%
6 Babe Ruth 1920 99 616 16.1%
7 Jeff Bagwell 1994 73 479 15.2%
8 Al Simmons 1930 93 611 15.2%
9 Albert Belle 1994 73 480 15.2%
10 Todd Helton 2001 105 697 15.1%

You may have noticed that 30% of the players on this list are named either Al or Albert, but none of them are named Pujols.  None of them are named Miguel, either.  In fact, the closest the reigning American League Triple Crown winner has come to cracking this list was in 2010 with a 13.0% XBH-PA ratio, and as of this morning he sits well out of range in 2013 at 12.5%, despite his own empirically otherworldly start.

This is, without a doubt, a most exclusive list of a most consistently slugging nature.  It’s enough to send pitchers into grand mal seizures at the very contemplation of this.  Or perhaps more exactly, it might if they were even aware of it.  This data point has probably not yet been illuminated in quite this way—this here article is the closest I myself have found so far, and Davis is not even the star of the piece.  But that does not mitigate the impressiveness of this feat of his so far.

This is not to say that Chris Davis is a better hitter than Miguel Cabrera, or Albert Pujols or Joey Votto or even Shin Soo Choo, for that matter.  But even if this does turn out to be a world class-level fluke season for him, Davis has a chance to crack an elite list inhabited only by the greatest of the great, even if he never knows it.