Extend Rendon

[Slateman]

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.

When you're talking about over 10 million a year being deferred, that's a significant amount of money.

If they really cared about it, LA wouldn't be able to sign anyone except for obscene amounts of money. Same with the Mets or the Yankees. Everyone would be running to the Rangers, the Diamondbacks, or the Florida teams. But they aren't. Because things like franchise culture, clubhouse atmosphere, and potential of the teams. Grandal didn't sign with the White Sox because the taxes were better than somewhere else he got offered. He signed there because it was the best offer he got.

Also, taxes don't "compound." You only get taxed on the money you make. So you get taxed once on the 10 million, and then only on the percentage you make beyond that. The state doesn't get to re-tax the principal.

[bluestreak]

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

I’m positive they get their cut on all the funds.

[Slateman]

I’m positive they get their cut on all the funds.

Agents are like lawyers. They always get their money.

[hotshot]

Chris Russo predictions> Stras returns to DC, Rendon to LA Dodgers for $200M contract, Donaldson resigns with ATL.

[GburgNatsFan]

Sure, but I'd imagine it's deferred, too.

Agents are like lawyers. They always get their money.

[Natsinpwc]

[nfotiu]

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.

Phil Mickelson is nagging about the taxes he pays all the time.  I don't know that 5% off is any more or less impactful if I'm making 100k and it's 5,000 or 10 million and it's $500,000.  In both cases it seems like a minor to moderate factor in a bigger decision.   

[Slateman]

Phil Mickelson is nagging about the taxes he pays all the time.  I don't know that 5% off is any more or less impactful if I'm making 100k and it's 5,000 or 10 million and it's $500,000.  In both cases it seems like a minor to moderate factor in a bigger decision.   

Phil Mickelson is a kangaroo

[UMDNats]

Every player I've talked to about taxes says they are well aware of the high-tax states and love when they can work/play/live in a no-income tax state. Sure the dumb guys don't know or care but most are smart enough to be like "hey this is less than I expected."

They don't make decisions only based on it obviously but it comes up in certain situations and it's one arrow in the quiver of certain teams.

[JCA-CrystalCity]

The real test would be if you had a franchise as willing to pay high in a low tax state that had a good shot at winning, would players prefer it?  You'd think Houston might be that sort of franchise, but the management seems to be hard for some players to take.  In the NBA, did the tax situation help the Rockets / Spurs / Heat v. the Knicks?  who knows how much of a factor it is. 

If it is $800K  on $10MM AAV, it may be a factor forcing the Yanks to offer $11MM if they believed they were bidding against Houston, but probably not against the Rangers.  I'll guess the Rays mention this as part of why their lower offers are worth more than what other teams offer unless they are beat substantially.

VA is probably a low tax state relative to PA, MA, NY, and CA.  It probably is a plus for the Nats.

[HalfSmokes]

The real test would be if you had a franchise as willing to pay high in a low tax state that had a good shot at winning, would players prefer it?  You'd think Houston might be that sort of franchise, but the management seems to be hard for some players to take.  In the NBA, did the tax situation help the Rockets / Spurs / Heat v. the Knicks?  who knows how much of a factor it is.  F

If it is $800K  on $10MM AAV, it may be a factor forcing the Yanks to offer $11MM if they believed they were bidding against Houston, but probably not against the Rangers.  I'll guess the Rays mention this as part of why their lower offers are worth more than what other teams offer unless they are beat substantially.

VA is probably a low tax state relative to PA, MA, NY, and CA.  It probably is a plus for the Nats.

The rays would need to offer no trade clauses or trade kickers to have anyone not laugh at their lower offer for tax reasons

[GburgNatsFan]

Surprise: MD and VA are tied at 19th (one being the lowest).

MA is at 10th. PA is tied at 2nd

NY and CA are much higher.

This is just state rates.

The real test would be if you had a franchise as willing to pay high in a low tax state that had a good shot at winning, would players prefer it?  You'd think Houston might be that sort of franchise, but the management seems to be hard for some players to take.  In the NBA, did the tax situation help the Rockets / Spurs / Heat v. the Knicks?  who knows how much of a factor it is. 

If it is $800K  on $10MM AAV, it may be a factor forcing the Yanks to offer $11MM if they believed they were bidding against Houston, but probably not against the Rangers.  I'll guess the Rays mention this as part of why their lower offers are worth more than what other teams offer unless they are beat substantially.

VA is probably a low tax state relative to PA, MA, NY, and CA.  It probably is a plus for the Nats.

[Dave in Fairfax]

Surprise: MD and VA are tied at 19th (one being the lowest).

MA is at 10th. PA is tied at 2nd

NY and CA are much higher.

This is just state rates.

Philadelphia levies a City Wage Tax of approximately 3.8-3.9%. The rate is similar in New York City, but that is on top of a much higher state income tax, so the effective rate in Philly for a million-plus income is about 7%, while in New York it is 10-12%.

[nattily attired]

Rendon is a baseball genius. A savant, as we all know. If Lerner/Rizzo fail, they have failed. There is no failure...only success. $210M for 4 years. Nothing deferred. Do it and reap once again the spoils of success.

[Mathguy]

$55M/yr sounds like alot, compared to some of the more recent signings.  Is this a typo ?  $210M for 6 yrs seems more in line with other contracts.

Rendon is a baseball genius. A savant, as we all know. If Lerner/Rizzo fail, they have failed. There is no failure...only success. $210M for 4 years. Nothing deferred. Do it and reap once again the spoils of success.

[JCA-CrystalCity]

$55M/yr sounds like alot, compared to some of the more recent signings.  Is this a typo ?  $210M for 6 yrs seems more in line with other contracts.

$35MM AAV for 5 or 6 years, maybe a players option for the 6th year if he's getting 400 PAs or something like that, would be the highest AAV for a position player and a reasonable length.

[HattoriHanzo]

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

If Harper accepted the Lerners offer, the last check he'd collect would be in 2052. If the deferrals didn't extend for over 30 years, he might still be playing for the nats. Zobrist and Cespedes deferrals would have been for 15-17 years each if they chose to play for the nats.

I read somewhere that the state of florida has 4.9% more current and former professional athletes residing there. No state taxes, warm weather, and great real estate is a big draw. Westlake, TX is another place that has a high concentration of residents that are professional athletes and celebrities. Socal is expensive, but there's a lot of attractive lifestyle reasons to move there if you're a wealthy athlete. Almost every F1 driver lives in monaco even though real estate and cost of living is high and it's because they pay zero taxes which can easily offset everything that is expensive there.

[HalfSmokes]

If Harper accepted the Lerners offer, the last check he'd collect would be in 2052. If the deferrals didn't extend for over 30 years, he might still be playing for the nats. Zobrist and Cespedes deferrals would have been for 15-17 years each if they chose to play for the nats.

I read somewhere that the state of florida has 4.9% more current and former professional athletes residing there. No state taxes, warm weather, and great real estate is a big draw. Westlake, TX is another place that has a high concentration of residents that are professional athletes and celebrities. Socal is expensive, but there's a lot of attractive lifestyle reasons to move there if you're a wealthy athlete. Almost every F1 driver lives in monaco even though real estate and cost of living is high and it's because they pay zero taxes which can easily offset everything that is expensive there.

Your second paragraph implies players would be smart to take deferrals

[GburgNatsFan]

Your second paragraph implies players would be smart to take deferrals

Because they'd be making that deferred money in a low income-tax state?

Huh.

[HalfSmokes]

Because they'd be making that deferred money in a low income-tax state?

Huh.

Exactly

[GburgNatsFan]

Exactly

Might make sense for Rendon then.

[Duke of Earl]

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

But the question was "Does deferred money avoid the jock taxes?"  and it's a good question.  I would think yes, as long as it's deferred past the player's career.  If he's earning that income and not playing, he can't be taxed in some state where he doesn't reside.  So, in that sense, deferred money can be a benefit to the player.

[Dave in Fairfax]

But the question was "Does deferred money avoid the jock taxes?"  and it's a good question.  I would think yes, as long as it's deferred past the player's career.  If he's earning that income and not playing, he can't be taxed in some state where he doesn't reside.  So, in that sense, deferred money can be a benefit to the player.

Since MLB operates under so many exemptions from the rules which apply to other employers, I am not 100% certain if deferred baseball player compensation would be considered a non-qualified deferred compensation plan for the purposes of the Pension Income Tax Limits Act. If so, however, it would probably only be exempt from source taxation if paid out over a period of at least ten years or for the life of the beneficiary. If so, the deferred income is taxable only in the state of residence when it is received. If not, it is taxable in the state of residence where it was deemed earned. This would implicate the so-called jock taxes, which aren't a separate tax but just rules applied by states to tax non-residents on income earned in that state. They are called jock taxes because visiting professional athletes are generally one of the few categories of employees to which the rules are applied.

[tomterp]

Also, taxes don't "compound." You only get taxed on the money you make. So you get taxed once on the 10 million, and then only on the percentage you make beyond that. The state doesn't get to re-tax the principal.

To clarify your point, you're taxed on income, not assets.

A further observation, you're taxed by states based on where your games are for the season.  A player will file a state income tax return for each and every state (territory, or district) his team played in.  So a Chicago player would have 50% of his income taxed there and the other 50% wherever else he played during the season.

[tomterp]

I read somewhere that the state of florida has 4.9% more current and former professional athletes residing there. No state taxes, warm weather, and great real estate is a big draw. Westlake, TX is another place that has a high concentration of residents that are professional athletes and celebrities. Socal is expensive, but there's a lot of attractive lifestyle reasons to move there if you're a wealthy athlete. Almost every F1 driver lives in monaco even though real estate and cost of living is high and it's because they pay zero taxes which can easily offset everything that is expensive there.

I'm having a bit of trouble following this thought, could you clarify?

As an example of my confusion, I would think Florida has a lot more than 4.9% more pro athletes residing there than say Vermont.  Maybe 1500% more.