Now that the election is over and we know who the next President will be (SbB’s endorsed candidate, Ric Flair, fell just shy), it’s time to reassess the next four years and how it will affect all of us. For most of us, day-to-day life probably won’t change that much, and if it does change it’ll probably be better.
But most of us aren’t baseball players, and the impending threat of dirty, horrible socialism - well, what else would you call increasing the tax rate of the highest bracket by 4.6%? Other than communism, of course - means that their paychecks are going to get smaller. So much smaller that the landscape of the free agency market is now much different:
[S]ome baseball agents already are thinking about trying to beat a possible tax increase for their well-paid clients.
President-elect Barack Obama has proposed increasing the top federal income tax rate from 35 percent to 39.6 percent, where it was under the Clinton administration. If signing bonuses are paid before Jan. 1, they likely would be taxed at the current rate and would not be subject to any tax increase.
Scoff as you rightly ought to, but for someone who makes, let’s say, $6 milly a year, that increase in taxes is going to mean their yearly take-home pay will go down by over a quarter of a million dollars. And when you add up all the salaries, as the MINNEAPOLIS STAR-TRIBUNE reports, there’s a substantial difference in cheddar changing hands here:
MLB players made close to $3 billion last year (or at least that’s what you get when you add up all these payroll numbers). They paid $944 million in federal income taxes; under the new rate, assuming they all qualify at that rate, they would have been taxed $1.068 billion. That’s $124 million more.
Yes, they’ll still be insanely rich, but athletes don’t always keep their money or make a ton to begin with, and levying taxes can easily be interpreted as hastening their post-career slide toward bankruptcy. The 50,000 fans they play in front of whose tickets pay the salaries, of course, might see things differently, but such is life when tax policy gets shifted.
As the KANSAS CITY STAR article mentioned, these changes can’t affect any money earned before January 1, 2009, so agents are pushing for deals to get done sooner than Christmas break, and more importantly for the signing bonuses to be paid before then. So sit down, trading deadline, and meet your new big brother: tax deadline.