Many people assume that athletes make tons of money, and they do — until tax season hits. That’s when things get a little dicey for American athletes. California loves to enforce what’s known as the “jock tax” in an effort to bring more money into its coffers. So what is a jock tax, how did it originate, and what does it have to do with Michael Jordan?
How did the ‘jock tax’ originate?
For anyone who doesn’t know what the jock tax is, it essentially says that a state can charge an athlete extra for the privilege of playing in their state. According to NBC Sports, it didn’t exist until Michael Jordan won the NBA Championship with the Bulls in 1991.
Jordan was celebrating with his teammates, and all seemed well. Then the state of California notified him that he owed taxes for his time spent in LA playing in the finals. It was a harsh blow, and Jordan was not pleased. He didn’t live in California, so being forced to pay taxes simply because he played in LA was highly unusual. That quickly changed, however.
Michael Jordan’s revenge
Illinois was not pleased with California and was quick to strike back. In an effort to make a point, Illinois created what is now known as ‘Michael Jordan’s revenge.’ It’s a law that essentially imposes income taxes on athletes from California and any other states that have a love for jock taxes.
Since Michael Jordan’s revenge is targeted at athletes from California, and not the state itself, it’s easy to argue that it didn’t really have much bite to it. The fact that more states were quick to follow suit shows how popular the jock tax is, even though many feel it is unfair.
Jock tax is not a thing of the past
Jock taxes are still alive and well. In fact, most states, and even some cities like Cleveland, Kansas City, Philadelphia, and Detroit, followed California’s example. Athletes are still not a fan of it. The jock tax not only affects NBA players now; it’s spread to most U.S. sports leagues, so most American athletes get hit with it. One might say players are used to it, now, but that’s not quite the case, however.
California still hits the hardest. Smart Asset reports, “Athletes who play for one of the NFL’s three California teams pay a marginal tax rate of 13.3%, the highest state-level tax in the country. For that reason, players on those teams give up more of their income in taxes than players anywhere else in the country.”
Fortunately for athletes who travel around the country playing, jock tax isn’t universal. States with a sports franchise don’t hit up athletes for more of their money. Florida, Washington, Nevada, Tennessee, and Texas are on that list, so athletes playing in those states can play without having their pockets drained.
Filing taxes is now a nightmare for pro athletes
According to Market Watch, NFL player Josh Martin once stated that his tax return was as thick as “a Bible.” Market Watch also reports that many new players aren’t coached on what jock tax is before they sign on, so all that money they think they’re making can quickly be swept away at tax time. For players who weren’t aware of it and didn’t plan accordingly, this can be a real shock.
Josh Martin isn’t the only one who struggled at tax time. In 2018, Brock Osweiler switched teams several times and figuring out his taxes that year was a nightmare. Sports Illustrated reports that he owed taxes in several states.
While there is no real way to avoid paying jock tax, there are a few loopholes. Rob Gronkowski managed to save $500,000 by moving to Florida where jock tax doesn’t apply. That doesn’t work for everyone, however. Even though Patrick Mahomes signed the highest paying contract in the history of athletics, he won’t be seeing that $503 million thanks to jock tax.