Sacramento Mayor Kevin Johnson has fallen out of touch with the economic interests and responsibilities of taxpayers and current NBA players. The impending relocation of the of the Sacramento Kings to Seattle led to the former professional basketball player to assist in the drafting of a new arena proposal in hopes of keeping the team in within the Golden State. Unfortunately, the proposal calls for the city to contribute $258 million in taxpayer dollars that they essentially do not have. Not only does Sacramento not have the money, but taxpayers voted against a similar proposal just a few short years ago.

ATR

Mayor Johnson is desperately trying to keep the Kings in California despite the fact that the city’s taxpayers don’t want to spend public funds to finance a vacuum project and the players are susceptible to the highest tax rates in the U.S. And that’s all before paying “jock taxes” on income earned for away-games and other various expenses.

As a former three time NBA All-Star, one would think Mayor Johnson would better understand the tax burden faced by NBA players and other professional athletes. That doesn’t appear to be the case.

Professional athletes – of all sports – not only pay the top marginal federal and state income tax rates, but are also now responsible for paying a “jock tax” on their earnings per away games. The “jock tax” burden – put into practice after the 1991 NBA season by the state of California – did not impact Johnson’s tax liability or economic earnings for his first five seasons in the league. As a member of the Cleveland Cavaliers in 1987 and the Phoenix Suns from 1988 to 1998 and 2000, his top marginal state income tax rate responsibilities ranged from 6.9 percent in Ohio and 8 percent to 5.1 percent in Arizona according to these respective states’ Department of Revenue.

On the federal side, Johnson’s federal income tax burden as an NBA player was 28 percent from 1987 to 1989, 31 percent from 1990 to 1992, and 39.6 percent from 1993 until his final retirement in 2000. It can be assumed since Johnson was a multiple NBA All-Star and one of the premier guards in the league that his earnings fell within the top marginal brackets across the board. With that in mind, why would a former player want to prevent a current player from obtaining their greatest earning potential throughout a relatively short career?

As it currently stands, Sacramento Kings players have a combined top marginal income tax rate of 56.7 percent: a 39.6 percent federal income tax rate, a 13.3 percent state income tax, and a  3.8 percent Medicare tax – all before paying the “jock tax”, which changes from year to year based on the team’s travel schedule, on the remainder of their salary. A move to Seattle would see the combined top marginal income tax rate reduced to 43.4 percent due to the Evergreen State’s lack of an income tax. For example, DeMarcus Cousins, the Kings’ leading scorer, would see his $2.2 million tax liability decrease to $1.7 million before paying the jock tax. Simply by relocating the team to Washington, Cousins would see his after-tax pay increase by $515,733.

For the 2012-2013 season, DeMarcus Cousins’ “jock tax” liability for the 41 away games is highlighted in the chart below.  Since he is in the middle of his contract, the estimated $47,326.83 per game is based only on his salary for this season. Signing bonuses, endorsements, and other viable sources of income would be taxed in his home state.

For game played in Canada, the estimated $9,489.03 he would pay will be counted as a tax credit by the U.S. federal government. Thus cancelling out the money he would owe for that game. The sum of each “jock tax” liability was calculated by multiplying the estimated $47,236.83 per game by the number of away games per state. The total number was then multiplied by the tax rate of the tax bracket of said state.

If the approval of the latest arena deal by the Sacramento City Council is upheld and approved by the NBA, Mr. Cousins can continue to expect home and away game tax liabilities of this magnitude.

With the thought of losing the Sacramento-based franchise to Seattle, Mayor Johnson and company pushed through a rushed $448 million arena proposal with the aim to counteract the possible team relocation to Seattle by the new controlling-interest owners Chris Hansen and Steve Ballmer. As reported by the Sacramento Bee, “the city would contribute $258 million, most of it by borrowing against future revenue generated by downtown parking meters and garages.” Sacramento taxpayers, when asked to vote on a similar proposal a few years ago, resoundingly voted against it. Clearly, elected officials have continued to not listen to their constituents.

Conversely, the proposed $490 million Seattle arena plans to use $200 million in public funds to finance the project with the public investment being paid back with admissions taxes from the arena and Hansen’s private funds if necessary. Both proposals misuse taxpayer funds – similar to the controversy involving NFL stadiums – to build arenas for privately owned sports franchises, and should’ve been financed through other, non-taxpayer avenues. But at least Hansen is responsible for replacing the public funds.

With two arena proposals now on the table, the final decision ultimately comes down to the NBA when the powers-that-be meet April 19 to decide the fate of the Kings franchise. Players and owners should be making their voices heard, particularly in favor of moving to Seattle. The team would be revitalized with a new team name, the Supersonics; a brand-new fan base that has been waiting for a professional basketball team to return since the original Supersonics became the Oklahoma City Thunder; owners willing to invest to bring in more talent and sponsors; and more economic earning potential for players, coaches, owners, and other members of the franchise.

A move to Seattle simply means that Kings – hopefully soon to be Supersonics – players will be able to keep their earnings for the 41 home games during the regular season before paying “jock tax” for all their away games. More disposable income would further allow players to re-invest in their new host city. Further improving the economy of Seattle and the state of Washington. Seattle just isn’t the same without the Supersonics. Mayor Johnson should recognize this since the Kings only came to Sacramento two years before he entered the league. Besides, who doesn’t miss seeing the green and yellow uniforms flash across the TV screen throughout the season?

This entry was posted on Tuesday, April 16th, 2013 at 7:46 am and is filed under Blog Posts.