Taxes

Are High Taxes to Blame for Minnesota's Championship Drought?

The Twin Cities have been waiting since 1991 for a winner. A University of Illinois-Chicago economist says lowering the income tax rate might help.

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Carlos Gonzalez/ZUMA Press/Newscom

Of the 13 metropolitan areas in the United States currently hosting teams in each of the four major professional sports leagues, none have been waiting longer to celebrate a championship than the Twin Cities.

One possible reason why? Minnesota's high personal income tax rate.

"You get a lot of complaining about professional sports in Minnesota, because this problem is especially acute there," Dr. Erik Hembre, told The Washington Post this week. "People complain about, 'Oh, we can't get good free agents. It really hurts us.'"

Hembre, an economist at the University of Illinois at Chicago, claims to have found a direct relationship between state tax rates and the success of professional teams based in those states. His research shows that, since the mid-1990s, a ten percentage point increase in income taxes correlates with a 2-3 percentage point decline in team's winning percentage. The effect is greatest in the National Basketball Association (where signing one major free agent arguably has a greater impact on a team's success than in any other major sport) and smallest in Major League Baseball, according to Hembre.

Minnesota's high tax rate, Hembre says, costs the Minnesota Timberwolves a total of 4.5 victories per season when compared to pro basketball teams in low-tax states like Florida or Texas.

Minnesota's state income tax is one of the highest in the country. The top marginal rate of 9.85 percent applies to anyone making more than $157,000 annually (or married couples making more than $262,000). That high rate might force teams in Minnesota to pay higher rate for the same talent, or might give highly-sought-after free agents a reason to play somewhere else.

The Twin Cities last celebrated a major sports championship in 1991, when the Twins claimed the World Series with a dramatic extra inning victory in the seventh and final game. Since then, not a single Minnesota-based team has reached the final round of their respective league playoffs.

Bad luck may be part of the answer. The Vikings of the National Football League reached the final round before the Super Bowl in 1998, 2000, and again in 2009, only to lose all three times (twice in overtime). The Minnesota Twins made regular playoff appearances during the 2000s, but only advanced past the first round on one occasion, which might say more about the comparatively random nature of Major League Baseball's playoff system than anything else. The Twin Cities' professional basketball and hockey teams have been occasionally competitive but never considered strong championship contenders since joining the National Basketball Association and the National Hockey League in 1989 and 2000, respectively. (It should be noted that the Minnesota Lynx are something of a dynasty in women's professional basketball, having won WNBA championships in 2011, 2013, and 2015.)

Other metropolitan areas with all four major professional sports have higher taxes than Minnesota does—the Los Angeles area and the San Francisco Bay Area in California, for example—but professional athletes might be willing to pay a premium, in the form of higher taxes, to live in places like that. As great as the Twin Cities can be (full disclosure: I lived there for three years and loved it), they have a hard time competing with South Beach and Hollywood for celebrity culture.

"Professional athletes are paid very well and therefore they have large incentives to consider the tax implications of the teams they choose to play for," Hembre told the Post.

Well-paid professional athletes are a particularly mobile sector of the workforce, and can more easily make decisions about where to live and work than most of us who can't slam dunk a basketball or throw a baseball at 90 MPH. Still, technology is making it possible for ever-larger segments of the workforce to have the kind of flexibility that once was possible only for those people with such specialized, and highly valued, skills. That's something that states should keep in mind when trying to attract talented workers, whether on the football field or in the office parks.

Lower taxes are good for lots of reasons. They allow workers to keep a larger share of their paychecks, let entrepreneurs and investors do more to stimulate the economy, and encourage existing businesses expand or hire more workers. They generally lead to overall economic growth.

And, maybe, just maybe, that would help the Minnesota Vikings finally win a Super Bowl.

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  1. So eventually those taxpayer subsidies wind up biting the teams, and thus the taxpayer expectations?
    Sweet.
    Too little too late, but those seem to be the only problems.

  2. Basing tax policy on catering to professional sports is a bad idea regardless of whether it’s raising them to pay for a stadium or lowering them to sign a free agent.

    1. OTOH basing the study on a particularly easy to quantify relationship between wealthy people and performance can indicate that relatively high income taxes penalize productive people and cause them to vote with their feet.

      Taxes can have the same effect on a salary regardless of its source.

  3. Vikings need some decent Offensive Linemen.

  4. Note that by this measure Massachusetts is a pretty low tax state, since its flat income tax has a lower than average top rate.

    1. They seem to win a lot of championships, though…

  5. RE: Are High Taxes to Blame for Minnesota’s Championship Drought?
    The Twin Cities have been waiting since 1991 for a winner. A University of Illinois-Chicago economist says lowering the income tax rate might help.

    The reason the Vikings suck is because of poor drafts, bad choices in free agency and terrible coaching.
    However, luring free agents with the concept of lower taxes might persuade people to go to the Vikes in order to save money in their checks.
    Maybe this is the reason the 49ers, Raiders, Chargers, Jets and Giants have sucked recently.
    The state income taxes of NY and CA are outrageously high.

    1. might persuade people to go to the Vikes in order to save money in their checks.

      I was in the twin cities last fall for a week and thought, hmmm I’ll check out if the vikings are playing. Tickets are *outrageous*. Who the fuck pays that kind of money.

      1. People who really like spending money to be outside in the cold?

        1. In both cases, being drunk helps.

    2. The Jets’ & Giants’ home game income has been made in NJ for many decades now.

    3. Yes, the Giants sucked enough so that Eli Manning won 2 Super Bowls with them …

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  8. That’s been the cry for Canadian sports teams for years and years. They, the thinking goes, have a harder time attracting free agents because of high taxes and teams often have to offer a premium to get them.

    There’s probably a lot of truth to that. If a players has the luxury of choosing taxes and weather could very well be the deal breaker.

    As for whether this is the difference between winning a championship and not, this seems a tad specious to me and wouldn’t mind a little more beef on such arguments.

  9. You have to take into account that they pay taxes for each state they play in. The Vikings don’t pay Minnesota income taxes for a game they play in Wisconsin. If you played for the Miami Dolphins (Florida doesn’t have income tax) you still pay NY, MASS, and NJ income tax for part of your income every year.

    1. True for football. But MLB doesn’t split or even share the gate, yet the high-tax Yankees have a very disproportionate W-L.

      1. The visitors don’t get a cut, so there are no taxes for them to pay on it.

      2. Doesn’t matter if they share the gate … that has nothing to do with it. The player is still getting paid. The players have to file state income tax returns for every state they play in unless the state doesn’t have an income tax.

    2. This isn’t true for every state. Only some states have the so-called jock tax.

      1. Only some don’t have a jock tax.

        by 2014, the only U.S. jurisdictions with major professional teams without a jock tax were Florida, Texas, Washington state, and Washington, D.C.

        Florida, Texas, and Washington state don’t have an income tax. That leaves the District of Columbia.

        U.S. Congress specifically prohibits the District of Columbia from imposing its income tax on non-residents who work there.

        As far as major sports go (NBA, NFL, NHL, MLBB) there are zero states without the “so-called jock tax”.

  10. Severe counterexample to this thesis: NY Yankees.

  11. The Minnesota Lynx (professional women’s basketball) have won 3 national championships, in 2011, 2013, and 2015. They’ve also won 5 conference titles. Why have you not included this in your article???

  12. Eric, how could you love the Twin Cities? It is cold most of the year, and when its not cold, its humid. The taxes and fees are outrageous. Plus no one knows how to drive – they merge onto the interstate at like 15 mph.

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  14. Weather? Twin Cities: cold rain, high of 39.

  15. Lower taxes because some parasitic pro sports teams win fewer games than others?
    Through the bottom of the barrel and into the floor again, Reason.

  16. That question could be applied for Buffalo, where the Bills championship was before the merger of the AFL and the NFL and the Sabres still wait for their 1st Stanley Cup championship.

    And there was also Cleveland until LeBron James “The Comeback”, Cleveland had got a long championship drought between 1964 and 2016. https://www.youtube.com/watch?v=CwVg99Bat2s

    I wonder if the Browns fans remember how to celebrate a championship? 😉

  17. This is a ridiculous article. Players do not take tax rates into account; they take opportunity into account. The Vikings became a much more desirable place to play by having a domed stadium.

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