Income Taxes Push Athletes Out of California, Toward Florida

Phil Mickelson. Tiger Woods. Kobe Bryant. What do these three have in common? Well, they’ve all lived in California, all make millions of dollars a year, and should have no financial worries, right?

Wrong.

Woods, who ranks third on the list of America’s wealthiest athletes and brings home about $56 million a year, moved his residence from California to Florida in 1996 to escape the high income taxes in California. Why, you ask? Because Florida doesn’t have a state income tax, which means its residents bring in a lot more money per paycheck.

Saying Goodbye to the Golden State

Thanks to increased taxes in California, athletes across the Golden State have found themselves in the midst of a debate — not over who the best athlete is, but which state is the best to live in to protect their “hard-earned” money. Mickelson faced a lot of heavy criticism earlier this year when he said that California’s tax increase could drive him out of the state, in order to avoid sacrificing his comfortable lifestyle.

Now that California has increased the top state income tax bracket to 13.3 percent and federal taxes on the top income bracket have increased by around 5 percent, rich athletes who call California home are coughing up a considerable amount of cash a year to the government.

Detroit Tigers outfielder Torii Hunter left California last year for Texas — a move motivated solely by the lack of state income taxes. Now, it is true that employees who earn income for work done outside their home state have to pay nonresident taxes. This is often referred to as the “jock tax,”which means that athletes still have to pay state and local taxes while playing on the road. However, it also means that other forms of income, such as endorsements, are taxed solely in their home state.

Saving a Buck

So for athletes like Woods, who frequent California for work but claim residency in Florida, this results in a lot of extra cash. For an athlete making around $10 million a year, they will pay more than a million in state income taxes as a resident of California. In Florida, they will pay $0. The other states that offer no income tax are Texas, Nevada, South Dakota, Washington, Alaska and Wyoming.

Perhaps this means that teams in states such as California, with high income taxes, should pay their athletes more in order to compensate? That’s a whole other debate. Or maybe it means that more prominent athletes will take their skills to other teams, away from the glitz and glamour that California provides, in order to save a buck (or millions). Maybe there’s hope for the Jacksonville Jaguars after all.

Either way, it’s nice to see athletes facing the same financial situations as the rest of us.

Author

Claire Knudsen
Social Media Specialist

Claire joined Debt.org in January 2013. She graduated from the University of Maryland in 2011 with a degree in Broadcast Journalism. In her spare time, she is a freelance writer and reporter while sharing her passion for healthy living and fitness.

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