Baseball Musings
Baseball Musings
November 05, 2008
Taxing Issue

Player Agents are already taking a potential tax increase into account as they negotiate for their clients:

Obama's proposal would increase federal income tax on families earning more than $250,000 annually, money that would help finance a decrease for workers and families earning less than $200,000. It's also possible more income might be subject to the Social Security tax.

Next year's major league minimum is $400,000. Agent Scott Boras, negotiating eight- and possibly nine-figure deals for free agents Manny Ramirez [stats] and Mark Teixeira, already has thought about the possibility of asking for larger signing bonuses payable this year in some of his contracts.

"There's some consideration to be had with the impact of the election," he said.

This could turn out to be a very busy last week of December. I'm also interested to see how big teams are willing to go bonuses. Let's say the market determines Mark Teixeira is worth a total of $100 million over a five year contract. Does a team give him a $20 million dollar bonus and pay him $16 million over the last five years of his contract? That would save Mark close to $1 million in taxes.

Or do teams just up the value of the contract? Paying him 1.7 million more per year covers the increase in taxes, giving him the same take home pay. So watch to see if contracts signed before the end of the year are structured differently than contracts signed after the first of the year, and if later signing free agents appear to be making more money than early signing free agents.


Posted by David Pinto at 08:17 AM | Free Agents | TrackBack (0)
Comments

Wait, do you mean that a signing bonuses is not taxable as income??? That's crazy. (I don't mean it's false, I just mean it's a crazy for the government not to treat a signing bonus as income. Of course it's income.)

Also, I don't see how a tax increase could in any way help a player get a raise. Either Teixeira is worth $102 million for five years to a team, or he isn't. If he is, he can get that money whether there's a tax increase or not. If he isn't (if he's worth *only* $100 million!), then he doesn't become worth it when taxes go up.

Posted by: James at November 5, 2008 11:10 AM

No, James, I mean that if they take the income this year, they pay a lower rate.

Posted by: David Pinto at November 5, 2008 11:27 AM

Oh, of course. Sorry.

Posted by: James at November 5, 2008 12:30 PM

Kinda wandering off-subject, but the quote opens the door. That number for alleged "tax cuts" is falling faster than AIG stock. The latest talk from the Democrats was 120K. As one wag suggested, anybody making over 30K might want to check offshore tax shelters.

Truth to tell, if the economy sours next year as much as the latest numbers indicate, it's hard to imagine anybody, even Obama and a heavily Democratic Congress, raising taxes on anything. Down the road, after the economy starts recovering, this story may become more relevant.

Posted by: Casey Abell at November 5, 2008 01:16 PM
Post a comment









Remember personal info?