“The Jock Tax” is the nickname given to the tax liability incurred by non-residents on income earned away from their home state. The moniker is derived from the simple fact that athletes are much more vulnerable to this tax due to their big salaries and schedules being in the open.
To summarize, baseball players are liable for tax to their state of residence as well as the state in which their team plays. When they travel on the road for games, their salary is prorated to the time spent in those road cities and states and those portions of income are taxed. The units of measurement to prorate the salaries are duty days or games played, which is not uniform across all cities and states. The difference between the two is off days. There are 162 games in a baseball season and around 220 duty days. In baseball, the difference between prorating salary based on games or duty days is minuscule and immaterial, which came in handy for this exercise.
Most states offer credits to their residents for taxes paid to other states, which prevents players from being grossly over-taxed, but given the lack of uniformity across the various taxing jurisdictions, the fact that some states do not even have an income tax (Florida, Washington, Texas, I’m looking at you), and the varying rates in the cities and states, it is certainly possible for a player on one team to pay much more tax than a player on another team. This can be very interesting when analyzing a contract because the gross salary received across multiple offers to a free agent can turn out very differently depending on the teams making the offer, a facet of analysis rarely explored. To that end, I calculated the effective tax rate for each major league team based on their actual 2011 schedule and the local and state tax rates. This way, anyone considering a contract can have an idea of what they might need to gross on different teams to arrive at the same net bottom line.
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