As you head to the post office or the IRS's website to pay your taxes, spare a thought for America's poor athletes, who are paying an average of $1 million apiece in taxes each year.
All right, "poor" doesn't really properly describe someone who makes enough to pay seven figures in taxes. A new study by Fields of Green, a USA Today project, indicates that NFL, NBA and MLB athletes will pay a total of $3 billion in taxes on their 2013 income. (For reference, the IRS will collect an estimated $2.5 trillion in income taxes for 2013.) Athletes' total salary in those three sports is estimated at $9 billion.
As Fields of Green notes, most athletes' income is taxed at the highest rate, 39.6 percent. They'll also pay an extra 0.9 percent on income more than $250,000 to help pay for the Affordable Care Act. Deductions only take the total rate to about 33 percent, leading to the $3 billion tax figure.
State taxes add an entirely new wrinkle. Many athletes pay exorbitant state taxes, which is why teams in Florida and Texas, with no state income tax, have an edge in recruiting free agents. Tiger Woods changed his state of residency from California to Florida early in his career to avoid California's high taxes; Phil Mickelson last year hinted that high taxes could force him to move from California.
Yes, it's tough to feel bad for someone who's got half a dozen zeroes in his paychecks. The problem comes in when these athletes don't realize that these paychecks aren't indefinite. “Wages for athletes can be huge but are earned over a relatively short period of time,” said Mitchell S. Halpern of O’Connor & Drew in Massachusetts. “The battle with an athlete is, if he’s making $10 million and taxes take half of that, he’s taking home $5 million. Is that paid over a lifetime? No. And their rate of spending can be, well, it’s amazing how much some guys can spend.”
Teams generally only withhold 25 percent of paychecks for taxes, and that can often leave athletes with a bit of tax shock come April 15. For their sake, they hopefully won't complain publicly about it.
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