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Lower Taxes May Have Helped Philadelphia Sign Bryce Harper

Harper considered signing with two California-based teams, but he would have had to pay millions more to the taxman.

Cliff Welch/Icon Sportswire 357/Cliff Welch/Icon Sportswire/NewscomCliff Welch/Icon Sportswire 357/Cliff Welch/Icon Sportswire/NewscomAfter a months-long courtship, the Philadelphia Phillies last week signed baseball superstar Bryce Harper to a record-breaking contract—and Pennsylvania's relatively friendly tax environment may have helped seal the deal.

The Phillies will pay Harper $330 million over 13 years—the most expensive contract in Major League Baseball history—and Harper will net approximately $184 million after paying his due in federal, state, and local taxes, according to an analysis by Robert Raiola, director of the Sports and Entertainment Group, which helps athletes and celebrities with tax planning.

That's a huge tax bill, but it's smaller than what Harper would have owed had he signed with one of the two top bidders for him during this year's free agent signing period. The San Francisco Giants reportedly offered Harper a 12-year contract worth $310 million—a higher annual salary than what the Phillies offered—but Harper would have netted only $161 million from that deal because of California's higher taxes. In order to offer Harper as much in take-home pay as the Phillies did, San Francisco would have had to pay $340 million over 10 years.

The Los Angeles Dodgers also jumped into the Harper sweepstakes, reportedly offering the outfielder a four-year, $168 million contract. Harper would have netted $89 million from that deal, according to Raiola.

Only Harper and his agent know whether taxes played a role in the decision to sign with Philadelphia. But the prospect of pocketing an additional $23 million (and getting to play half his games in a much more hitter-friendly ballpark) would seem to be a strong incentive to pick Philadelphia over San Francisco.

He would hardly be the first athlete to make such a decision for such a reason. In 2014, one reason Trevor Ariza left the National Basketball Association's Washington Wizards to sign with the Houston Rockets was because he "could pocket more money because the state doesn't tax income," The Washington Post reported at the time.

"As taxes rise in many states, no-income-tax states like Texas, Florida, Washington, Tennessee, and Nevada may become increasingly attractive to athletes, entertainers, and other high-income producers," writes David Boaz, executive vice president at the Cato Institute.

Pennsylvania might not be on that list, but the state's flat income tax of 3.07 percent makes it one of the more attractive places for highly paid athletes (or for not-so-highly-paid Average Joes) among states that do collect income taxes.

Professional athletes end up having to pay taxes in every state where they play, so Harper will still have to pay higher tax rates when the Phillies go on the road to visit California or New York or elsewhere. But he'll save a significant amount by having half his games in Pennsylvania.

Meanwhile, Philadelphia charges workers a wage tax of 4 percent if they live inside the city; those who live elsewhere and work in Philadelphia pay only 3.5 percent. According to an analysis by The Philadelphia Inquirer, Harper could save $7.5 million over the course of his massive contract simply by choosing to live outside the city—something that really exposes the weird incentives created by Philadelphia's wage tax, one of the highest such taxes in the country.

Harper's situation is an extreme case, since most of us don't have the luxury of figuring out how to avoid paying higher taxes on $330 million. But migration data consistently show that tax rates are at least part of the reason why people choose to live and work where they do. That's part of the reason why high tax states like Connecticut are seeing an exodus of taxpayers and why Illinois struggles to attract investment.

If Harper's contract pays off for Philadelphia in the form of a World Series championship, Phillies fans—including yours truly—might have to thank California lawmakers for making their state less attractive than Philadelphia, which is really saying something.

Photo Credit: Cliff Welch/Icon Sportswire 357/Cliff Welch/Icon Sportswire/Newscom

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  • Crusty Juggler||

    He is way too softy and pretty for Filthydumpsinya.

  • Leo Kovalensky II||

    He's going to need to learn how to dodge batteries being thrown from the stands if he repeats his 2018 season.

  • 68W58||

    He picked it up second half, but he was terrible for the first 90 games or so.

  • Mrs. Premise||

    Hey, we haven't thrown batteries at anyone for 20 years!

  • loveconstitution1789||

    Haha. Higher taxes are self-correcting in this Republic which is what the state experiments can be all about.

    Great Players dont want to take offers in high tax states, so those teams in high tax states have teams that dont perform as well and make less money. They have less money to offer players , so less players want to go to state with high taxes and low offers.

  • Dalepen||

    Taxes or no taxes considered, not a bad deal for a player who batted .247 last year!!!

  • OpenBordersLiberal-tarian||

    This is one of the issues on which I disagree with my progressive friends. Most of them would say $330 million is just too much money, especially for an athlete whose 2018 season wasn't even that good. But as a Koch / Reason left-libertarian, I congratulate Harper.

  • Crusty Juggler||

    But as a Koch / Reason left-libertarian, I congratulate Harper.

    Yep.

  • JFree||

    The Phillies will pay Harper $330 million over 13 years—the most expensive contract in Major League Baseball history—and Harper will net approximately $184 million after paying his due in federal, state, and local taxes

    This is exactly why income taxes are the wrong way to raise revenue at the top of the scale. Harper will probably be paying more in taxes than Bezos and Buffett during those 13 years. Because he is building wealth from scratch via his labor and not building wealth by sitting on capital appreciation.

    A far better approach re revenue at the top end is a wealth tax with a much lower marginal income rate. If Switzerland was the model, Harper/Bezos/Buffett would all be paying 12% on their annual income and a bit less than 1% on their accumulated wealth (both at the federal level - local/canton would differ but most cantons have a similar tax base structure). Which means Bezos/Buffett would be paying a LOT more than Harper (who sure won't be earning that income beyond 13 years).

    The income tax itself was a cronyist scam by the uberrich to avoid the populist tax then (land tax). It's the wrong way to raise revenue at the top.

  • loveconstitution1789||

    Taxes are too high. Government is too big.

  • JFree||

    Government is too big.

    Like you R's are remotely credible on that issue. Government spending grew by 5-6% each year since 2016 with R control of the entire govt. Fucking useless party - and that crappy credibility on that also extends to everything else re 'fiscal responsibility'.

    Yes - that means taxes too since an additional $3 trillion or so debt in that time is just you R's choosing to raise future taxes on your own children/grandchildren. Taxes are too high indeed. Fuckwads.

  • chipper me timbers||

    I think you may be confusing this place with FoxNews or something. It's a libertarian (ostensibly at least) news and commentary site. Taxes are not just too high, they're about 90% too high! Government is not just too big, it should be slashed by 90%!

    Get it?

  • chipper me timbers||

    Oh Leviathan only grew by 6 percent! I feel so much better now!

  • loveconstitution1789||

    Good thing that I am a Libertarian and government could be cut by 50% easily. 75% would be more like it.

  • Sevo||

    JFree|3.4.19 @ 1:54PM|#
    "Government is too big.
    Like you R's are remotely credible on that issue."

    I have voted for exactly one R candidate in my life; the R opponent to that grease-bag Newsom.
    But I notice your response is exactly what I've come to expect from you: "Look over THERE!"
    Keep it up JFree; you never disappoint anyone with a brain.
    Shitbag.

  • JFree||

    BS

  • Gilbert Martin||

    "The income tax itself was a cronyist scam by the uberrich to avoid the populist tax then (land tax). It's the wrong way to raise revenue at the top."

    Meanwhile back in the real world the reason the federal income tax was enacted via the 16th Amendment was because the so-called "progressives" wanted to use it to redistribute wealth and the booze prohibitionists wanted to the federal government to have another source of revenue to replace the tariff on alcohol so they could enact prohibition - which is exactly what they did.

  • Gilbert Martin||

    "This is exactly why income taxes are the wrong way to raise revenue at the top of the scale. Harper will probably be paying more in taxes than Bezos and Buffett during those 13 years. Because he is building wealth from scratch via his labor and not building wealth by sitting on capital appreciation."

    The only correct way to raise revenue for the entire scale is to fund government activities the same way that it's done in the private sector - on a user fee basis.

    Neither my income nor my wealth level is a service that has been provided to me by the federal government.

  • smartmuffin||

    This is a widely known issue in hockey, where the salary cap makes it even more interesting (because teams in high-tax jurisdictions can't simply choose to offer a little bit more).

    Teams like Tampa Bay, Florida, and Dallas can end up offering players "more" money (for the same nominal contract) because they are states with no income tax.

    Meanwhile, teams like Montreal, New York (both of them), and LA struggle. Players don't care what the nominal value of their contract is, they care about how much they can take home.

  • loveconstitution1789||

    Take home income is the magic number.

  • John||

    I am starting to wonder if it is the reason why the Lakers have done such a poor job of attracting free agents over the last few years. Other than LeBron James, time and again players have said they want to go to the Lakers only to sign somewhere else.

  • Happy Chandler||

    Now do Kevin Durant.

    Starting with Kobe's last couple years, the Lakers have been a shit show. Taxes have nothing to do with it.

  • MiloMinderbinder||

    But he's going to have to pay the Philly soda tax.

  • Unicorn Abattoir||

    I bring a soda into Philly with me every time I go into the office. I buy them in bulk, so they only run me about 30 cents.

    Harper, if your wallet's a little thin, I'll bring one in for you too.

  • John||

    Even as bad as New York is, their highest tax bracket is just a bit over half of California's. Money isn't everything, especially when you are making that kind of money. So, I can see why you wouldn't necessarily just sign in Florida or Texas if there were other teams that you felt you fit into better or gave you a better chance to win. But 13.3% is insane. I can't believe any highly paid person would agree to a job in California if they had any other choice.

  • Nardz||

    Clown contract, bro

  • Uncle Jay||

    You would think Mr. Harper would be more than happy to pay more in taxes in California.
    How else is California going to build that bullet train from nowhere to nowhere?
    (Kicks the desk in frustration.)

  • Weigel's Cock Ring||

    Even that fucking dickwad Andrew Cuomo admits that higher taxes are bad for his state because many taxpayers will choose to leave. He has been bitching about the SALT deduction cap almost nonstop. "We have a very fragile economy" he whines. Well whose fault is that, jerkoff?

  • Juice||

    Some of those state income tax rates are misleading. The state income tax is not the final tax on your income in some places, like MD, where you have a state income tax, a county income tax, and in some cases a municipal income tax.

    I wish I was paying only 5.75%.

  • John||

    I don't have either of those in Maryland.

  • Juice||

    Really? What county do you live in?

  • Juice||

    Are you sure?

    This shows that there is an income tax for every county in MD.

  • chipper me timbers||

    NYC has an income tax as well on top of state income tax.

  • Juice||

    Meanwhile, Philadelphia charges workers a wage tax of 4 percent if they live inside the city; those who live elsewhere and work in Philadelphia pay only 3.5 percent.

    What part of "move the fuck out of our city" do you not understand?

  • Unicorn Abattoir||

    You'd be surprised how many city residents think that living in Philly confers some type of status on them.

  • Juice||

    The property tax rates in some of the suburbs seem to follow that model. They're fucking obscene. I was just curious looking around on Redfin one day and saw that some places would have $12k annual taxes on a $250k house. WTF?

  • Juice||

    Like this:

    House

    Ok, not $12k. I can't remember what suburb that was, but still it's $7335 for a $269k house.

  • smartmuffin||

    That's about what I'm paying in property tax in the Houston suburbs. No state income tax tho.

  • Unicorn Abattoir||

    My house is valued a little lower ($235K) and I pay just under $7000 - but I'm in the Jersey Democratic Republic.

    Property taxes are usually significantly lower in PA. But being right by KOP and Plymouth Meeting, they can probably tax whatever they want.

  • Unicorn Abattoir||

    You may be able to file a tax appeal based on the pictures of the bathroom in the listing. Damn that's hideous.

  • Jack Klompus Magic Ink||

    And when they try to unload that garbage townhouse they bought in Fishtown for $350,000 that's falling apart and being picked clean by the junkies in the next neighborhood, we can point and laugh.

  • Jimoxe||

    My son was paying a 7% income tax when he lived in Philly.
    No wage tax cuz he worked in Jersey.
    Gave himself a 6% raise by moving about 2 miles.

  • XM||

    This is terrible news for the Angels.

    Mike Trout is twice the player that Harper is (Harper's deal likely affects his asking price) and he's currently playing in the highly taxed California. Oh, and he's an Eagles fan.

  • oklahoya||

    The state tax argument cannot explain Harper's rejection of the Nationals' offer. Although DC has a high income tax rate, it does not have a commuter tax. With the Nats, Harper would have been taxed at the zero rate of his Nevada residence.

  • ElvisIsReal||

    But then he has to keep playing for the Nats. In DC.

  • buybuydandavis||

    The end of deductibility of state and local taxes is *huge*.

    Money will be pouring out of big government states.

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