Extend Rendon

[nfotiu]

It makes the Lerners deferred contracts look better- maybe below a safe investment, but when you factor in state taxes wherever you retire vs state taxes while playing coupled with jock taxes, the equation starts to change (I’m waiting for a team/agent to find a way to salary offseason to avoid those ones)

This article says that signing bonuses are taxed where the player resides:

http://anderscpa.com/state-tax-implications-major-league-baseball-players/

[HalfSmokes]

This article says that signing bonuses are taxed where the player resides:

http://anderscpa.com/state-tax-implications-major-league-baseball-players/

If you look at Scherzer, $50 million on a $210 million deal is signing bonus, depending on where he lived when he signed and where he retires, he may end up only paying state taxes on $55 million out of the whole contract

[nfotiu]

If you look at Scherzer, $50 million on a $210 million deal is signing bonus, depending on where he lived when he signed and where he retires, he may end up only paying state taxes on $55 million out of the whole contract

He lives in VA, right?   So, I am guessing the signing bonus ensures that money is paid at the VA rate which should be quite a bit lower than the DC rate?

[HalfSmokes]

He lives in VA, right?   So, I am guessing the signing bonus ensures that money is paid at the VA rate which should be quite a bit lower than the DC rate?

MD, VA, and DC have a tax compact so you pay income taxes on where you live not where you work. For some reason, I just assume people live elsewhere in the off-season

[bluestreak]

Net present value is easy to calculate. I’m not sure why you can’t assess the value of deferred money vs non deferred money.

[HalfSmokes]

Net present value is easy to calculate. I’m not sure why you can’t assess the value of deferred money vs non deferred money.

I’m a vacuum it’s easy, but when you figure in taxes, especially different jock taxes for individual away series, it get much hard (which is probably why most news sites don’t bother). I’m assuming that the agents negotiating (especially something like Boras Corp) factor it all in

[nfotiu]

I’m a vacuum it’s easy, but when you figure in taxes, especially different jock taxes for individual away series, it get much hard (which is probably why most news sites don’t bother). I’m assuming that the agents negotiating (especially something like Boras Corp) factor it all in

And all those things are potential benefits to the player.   If I'm a player knowing I have a career that will be over by the time I'm 40, I'm pretty ok taking the equivalent value in deferred money that will keep paying me a substantial income for years after I retire.  Especially if it is giving the team flexibility to build a better team around me.

[Slateman]

And all those things are potential benefits to the player.   If I'm a player knowing I have a career that will be over by the time I'm 40, I'm pretty ok taking the equivalent value in deferred money that will keep paying me a substantial income for years after I retire.  Especially if it is giving the team flexibility to build a better team around me.

Except to get the equivalent value, it has to be a significant overpay. You're not accruing interest, and it doesn't allow for inflation, so, deferred money is actually diminishing the value of your contract. Hence why you have to overpay, like  we did Scherzer.

[bluestreak]

Does deferred money avoid the jock taxes?

[HalfSmokes]

Except to get the equivalent value, it has to be a significant overpay. You're not accruing interest, and it doesn't allow for inflation, so, deferred money is actually diminishing the value of your contract. Hence why you have to overpay, like  we did Scherzer.

Not really, the lack of taxes swamps a discount rate based on interest pretty easily

[HalfSmokes]

Does deferred money avoid the jock taxes?

The teams and agents can structure the deferrals however they want and neither side has any motivation to do so in a way that subjects the player to additional taxes

[Slateman]

Not really, the lack of taxes swamps a discount rate based on interest pretty easily

lol, no, no it doesn't. Not at all.

Again, they don't give a freak about taxes. These aren't people in the business of building wealth. They don't care about taxes. They don't do their taxes. Between their publicists and agent(s), they aren't going to miss an additional 8% from their paychecks.

No one is going to choose the Rangers or the Marlins over the Red Sox or Dodgers because of the taxes. Particularly when what matters is the AAV and the total amount.

[bluestreak]

lol, no, no it doesn't. Not at all.

Again, they don't give a freak about taxes. These aren't people in the business of building wealth. They don't care about taxes. They don't do their taxes. Between their publicists and agent(s), they aren't going to miss an additional 8% from their paychecks.

No one is going to choose the Rangers or the Marlins over the Red Sox or Dodgers because of the taxes. Particularly when what matters is the AAV and the total amount.

He was talking about the tax rate vs the discount rate for deferred money. And he’s right. The discount rate is going to be lower than the tax rate.

Outside of that, 8 percent of $200 million is $16 million. Nothing I have seen makes me think that these guys do not care about 16 million dollars. Maybe sometimes they decide that it’s mitigated by other factors like competitiveness, but there’s no evidence that they see it as the equivalent of rounding error.

[Slateman]

He was talking about the tax rate vs the discount rate for deferred money. And he’s right. The discount rate is going to be lower than the tax rate.

Outside of that, 8 percent of $200 million is $16 million. Nothing I have seen makes me think that these guys do not care about 16 million dollars. Maybe sometimes they decide that it’s mitigated by other factors like competitiveness, but there’s no evidence that they see it as the equivalent of rounding error.

It's 16 million over the course of the contract.

Are you telling me that Bryce Harper would have turned down a 13 year, 330 million dollar deal with the Mets because the tax rate is marginally more than in Philly? Or that would have taken a 13 year, 315 million dollar deal with the Rangers over the one offered by the Phillies?

 No. He would have signed the deal with the most money because it's a status symbol for him. That's what contract money is to these guys. It's about the total amount and the AAV and setting up other players to get paid.

State income taxes are such a paltry amount that in these income brackets, none of them notice what's missing in their paychecks.

[HalfSmokes]

It's 16 million over the course of the contract.

Are you telling me that Bryce Harper would have turned down a 13 year, 330 million dollar deal with the Mets because the tax rate is marginally more than in Philly? Or that would have taken a 13 year, 315 million dollar deal with the Rangers over the one offered by the Phillies?

 No. He would have signed the deal with the most money because it's a status symbol for him. That's what contract money is to these guys. It's about the total amount and the AAV and setting up other players to get paid.

State income taxes are such a paltry amount that in these income brackets, none of them notice what's missing in their paychecks.

California’s income tax tops out at 13%. That’s before you get hit with jock taxes - I somehow doubt players (or their agents) are stupid enough not to account for that

[Slateman]

California’s income tax tops out at 13%. That’s before you get hit with jock taxes - I somehow doubt players (or their agents) are stupid enough not to account for that

Do you think Harper would have turned down a 13/340 deal from the Dodgers because of the state taxes?

[nfotiu]

It's 16 million over the course of the contract.

Are you telling me that Bryce Harper would have turned down a 13 year, 330 million dollar deal with the Mets because the tax rate is marginally more than in Philly? Or that would have taken a 13 year, 315 million dollar deal with the Rangers over the one offered by the Phillies?

 No. He would have signed the deal with the most money because it's a status symbol for him. That's what contract money is to these guys. It's about the total amount and the AAV and setting up other players to get paid.

State income taxes are such a paltry amount that in these income brackets, none of them notice what's missing in their paychecks.

I can give you that for Harper.  I don't think everyone is like Harper though.   Sure, there may be a few bigger than life characters out there who care about such things, but most of the others will care about the whole picture and I'm sure all these agents have good finance guys who can draw a pretty good picture of what the different contracts/deferred money/tax implications are.

But anyway, you are contradicting yourself by saying they only care about AAV and total amount when you are saying the deferred money will turn them off.  In Bryce Harper's case, he had some caveman type comment regarding how dumb the deferred money is, so it probably did make a difference to him.  So yeah, Bryce Harper doesn't seem to get a lot of the nuances in financial matters or probably much else and wanted the biggest salary and wants all his money now.   I tend to think he's the exception and not the rule.

[HalfSmokes]

I can give you that for Harper.  I don't think everyone is like Harper though.   Sure, there may be a few bigger than life characters out there who care about such things, but most of the others will care about the whole picture and I'm sure all these agents have good finance guys who can draw a pretty good picture of what the different contracts/deferred money/tax implications are.

But anyway, you are contradicting yourself by saying they only care about AAV and total amount when you are saying the deferred money will turn them off.  In Bryce Harper's case, he had some caveman type comment regarding how dumb the deferred money is, so it probably did make a difference to him.  So yeah, Bryce Harper doesn't seem to get a lot of the nuances in financial matters or probably much else and wanted the biggest salary and wants all his money now.   I tend to think he's the exception and not the rule.

Harper comes of as about as educated as I’d expect someone with a year of community college under their belt to be. Somehow, I’d expect Rendon to be more savy

[bluestreak]

Funny thing about Bryce is that by signing a 13 year contract, he is, for all practical purposes, taking deferred money.

[Slateman]

I can give you that for Harper.  I don't think everyone is like Harper though.   Sure, there may be a few bigger than life characters out there who care about such things, but most of the others will care about the whole picture and I'm sure all these agents have good finance guys who can draw a pretty good picture of what the different contracts/deferred money/tax implications are.

But anyway, you are contradicting yourself by saying they only care about AAV and total amount when you are saying the deferred money will turn them off.  In Bryce Harper's case, he had some caveman type comment regarding how dumb the deferred money is, so it probably did make a difference to him.  So yeah, Bryce Harper doesn't seem to get a lot of the nuances in financial matters or probably much else and wanted the biggest salary and wants all his money now.   I tend to think he's the exception and not the rule.

It's by and large for most of them. They care about liking a clubhouse and organization far more than taxes. Most of them are making so much money that taxes are irrelevant.

Multiply your earnings by a factor of 10 and then tell me you would give two freaks about ~5% more taxes. You wouldn't. Particularly when compared to the culture of the company you would work with and how successful you would be able to be with that company.

Deferred money is far more lost revenue than a small percentage of taxes because it compounds over time and you can't invest it, while still getting taxed on it. That's why deferred amounts have to be so much more. Scherzer was projected to get 165-175 million, but the Nats blew all the offers out of the way. However, with the deferments, the total value of he contract to Scherzer when it's all over is far less.

This is why Harper/Boras said no to the deal the Lerners offered. It was so backloaded that it would have barely been half of the stated value by the end of the contract.

Deferring half your paycheck to 7 years from now is way more noticeable and impactful than a 4-8% tax increase.

[Slateman]

Funny thing about Bryce is that by signing a 13 year contract, he is, for all practical purposes, taking deferred money.

How so? Harper clearly wasn't taking less than a 10 year deal.

The Nationals offered him 12 years, 250 million, with deferrements until he was in his 60s. That's not even close to comparable with tax rates.

[HalfSmokes]

Deferred money is far more lost revenue than a small percentage of taxes because it compounds over time and you can't invest it, while still getting taxed on it. That's why deferred amounts have to be so much more. Scherzer was projected to get 165-175 million, but the Nats blew all the offers out of the way. However, with the deferments, the total value of he contract to Scherzer when it's all over is far less.

This is why Harper/Boras said no to the deal the Lerners offered. It was so backloaded that it would have barely been half of the stated value by the end of the contract.

Deferring half your paycheck to 7 years from now is way more noticeable and impactful than a 4-8% tax increase.

I would love to see your ‘math’ on this

[Slateman]

I would love to see your ‘math’ on this

Deferred money is money you aren't earning anything on. Its the same as shoving it in a mattress or a safe instead of investing it. This is common knowledge and it's the reason why deferred contracts have to be so much more than market value. 

[bluestreak]

Taxes compound too. You can’t say they care about deferrals but not about taxes. It’s literally the same thing. The reasons people don’t like deferred payments is because they lose whatever they could have done with that money. So whatever interest you caN get. I seriously doubt these guys are getting significantly more than 8-13% annual return on their money. It’s literally the same thing.

So maybe you’re saying the athletes are too dumb to notice, but their agents and financial guys certainly do know.

Maybe some players just care about having the highest number in the press release, but for people in the tier below Harper, they definitely care.

[GburgNatsFan]

Maybe their agents don't like the cut they can't take on deferred money.

Taxes compound too. You can’t say they care about deferrals but not about taxes. It’s literally the same thing. The reasons people don’t like deferred payments is because they lose whatever they could have done with that money. So whatever interest you caN get. I seriously doubt these guys are getting significantly more than 8-13% annual return on their money. It’s literally the same thing.

So maybe you’re saying the athletes are too dumb to notice, but their agents and financial guys certainly do know.

Maybe some players just care about having the highest number in the press release, but for people in the tier below Harper, they definitely care.