Freedom Line Blog

What does state tax policy have to do with wins and losses in the NFL? Potentially a lot, according to an editorial in the Washington Times.

During a recent luncheon, Houston Texans star running back Arian Foster implied that part of the reason he chose to re-sign with the Texans last year was due to the lack of an income tax in the Lone Star State.

Foster appears to be part of a growing movement of NFL players considering how state income tax rates impact their bottom line when deciding where to play.

It makes perfect sense. As the Washington Times editorial points out that NFL players receive “only 17 paychecks a year, nine of which are subject to state income taxes in the town where their home games are played, and the remaining eight are taxed according to the location of away games.”

The editorial continues:

Since salary caps limit how much NFL teams can pay players, the biggest difference in what players can earn from one team to the next often comes down to home-state income taxes. This can range from zero in Florida, Tennessee, Texas and Washington state to 8.82 percent in New York, 8.97 percent in New Jersey and 13.3 percent in California.

Last year, when Mr. Foster earned $18 million, he didn’t have to pay state or local income taxes on any of the money he earned in Texas. If, however, he played for the San Francisco 49ers or the San Diego Chargers, Mr. Foster would have shelled out more than $1.2 million to California bureaucrats.

As more top free agents begin to take state income tax rates into consideration, organizations in high-tax states such as the Cleveland Browns, Oakland Raiders, Minnesota Vikings, Buffalo Bills, New York Jets and New York Giants could be hard-pressed to lure talent. Teams in low- and no-income-tax states such as the Dallas Cowboys, Seattle Seahawks, Miami Dolphins, Indianapolis Colts, Denver Broncos and Tennessee Titans will increasingly be in a better position to sign quality players and, ultimately, succeed on the field.

Still think state taxes can’t determine winners and losers in sports? Just look at the NBA where teams are even more restricted in the salaries they can offer players. The editorial points out that “over the past nine years, teams located in the 10 lowest-taxed cities in the NBA reached the NBA Finals 10 times, winning six championships. During that same span, only three times did a team playing in an NBA market with one of the 10 highest income-tax burdens appear in the Finals.”