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Matt Blumenfeld

Taxes: NCAA Championship Costs Rick Pitino Over Half His Salary


Posted by Matt Blumenfeld on Thursday, April 11th, 2013, 10:44 AM PERMALINK


First and foremost, congratulations to Coach Rick Pitino and the Louisville Cardinals on winning this year’s NCAA Men’s Basketball Championship. They deserve all the acclaim and praise for their accomplishments and success.

That being said, winning the national championship comes at a cost.

According to Bloomberg News, Pitino stands to make $425,000 in bonuses for guiding Louisville’s championship season in addition to his $5.7 million salary this year. However, one would never tell that he received a bonus after examining his tax liability.

With Pitino’s earnings for this year placing him in the top bracket of tax rates prior to his championship bonus, the coach can expect his total tax burden to be 51.6 percent.

That makes his total tax liability an estimated $3.16 million. Coach Pitino’s tax burden and liability is calculated as follows:

Federal Income

Tax Rate

Medicare

Tax

State and Local

Tax Burden

Total

Tax Burden

39.6%

3.8%

8.2%

51.6%

For illustrative purposes, the total tax burden is applied only to his base salary and championship bonus for this year. The state and local tax rate includes the city of Louisville’s 2.2 percent resident income tax rate and Kentucky’s 6 percent top marginal state income tax rate.

For the only coach to win a national championship with two college basketball programs, his after tax pay is roughly $2.96 million: $200,000 less than what he will pay in taxes.

Simply put, over half his earnings go towards the federal, state, and city governments. And that’s for someone in the top marginal income brackets living in Louisville, Kentucky.

It also doesn’t help that Kentucky is one of the handful of states that levy a city or county income tax – for both residents and non-residents - in addition to state income tax rates.  Imagine what his tax liability and burden would be if he coached and won a championship at colleges in California, New York, or D.C. 

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UPDATED: Tony Romo New Highest Paid NFL Player After Taxes


Posted by Matt Blumenfeld on Wednesday, April 3rd, 2013, 1:48 PM PERMALINK


Over Easter weekend, franchise quarterback Tony Romo signed a 6-year $108 million contract extension to remain with the Dallas Cowboys. While the estimated $18 million per year makes Romo the fifth highest paid player based on salary, he is actually the new highest paid player after taxes in the NFL.

The Cowboys QB now claims the top spot previously held by Drew Brees of the New Orleans Saints because of no state income tax in Texas. With Romo’s income tax burden being 43.4 percent – the top marginal federal income tax rate of 39.6 percent plus the 3.8 percent Medicare tax – and estimated tax liability of $7.81 million, he still stands to earn $70,000 more than Brees.

Player

Team

Federal Income Tax Burden

State and Local Tax Burden

Total Tax Liability

Drew Brees

New Orleans Saints

$8.68 million

$1.2 million

$9.88 million

Tony Romo

Dallas Cowboys

$7.81 million

$0

$7.81 million

For illustrative purposes, the federal income tax rate used in 39.6 percent and 3.8 percent Medicare tax. State and local tax rate used is the top marginal income tax rate of each state. The tax rates mentioned also apply only to his contract salary and does not take into account his bonuses, endorsements, other sources of viable income, or structure of contract.

Romo should serve as an example of why businesses and taxpayers are making the move to Texas. Under Gov. Rick Perry, Texas has continued to thrive and experience economic growth throughout the recession because of its low tax rates and economic competitiveness. While a handful of GOP governors are seeking to eliminate or lower their states’ incomes tax rates, such as Gov. Jindal and Gov. Brownback, more players will want to play in states where they will not feel the greatest tax sting. Some teams might even seek to relocate to one of these states.

**Update: Initial difference in earnings and total tax liability for Tony Romo did not take into account the 3.8 percent Medicare tax on his yearly salary. While the new number is less after this addition - from an estimated $752,000 to $70,000 - the fact remains that Tony Romo is still the highest paid NFL player after taxes.

Player

Estimated Contract Salary Before Taxes

After Tax Earnings

Drew Brees

$20 million

$10.12 million

Tony Romo

$18 million

$10.19 million

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Fox News Correspondent's Inaccurate Claims about Stadium Funding


Posted by Matt Blumenfeld on Wednesday, March 20th, 2013, 12:23 PM PERMALINK


Dan Springer, a Fox News correspondent, recently claimed that the University of Washington’s $250 million stadium renovation is being passed on to taxpayers, thus making Washingtonians responsible for the bill. His reasoning is based on the premise that funding for the stadium is coming from donors and charitable contributions hence costing the U.S. Treasury $154 million over 30 years. Since the donors receive a tax deduction for their voluntarily given contributions, Springer is essentially stating that these donors are inhibiting the tax revenue growth of the federal government.

In other words, Springer is advocating that the federal government has a right to collect taxes on 100 percent of your earnings, and if you take a tax deduction for something, the government has seemingly “spent” money on you or your cause. Because tax revenue will be lower, Springer is under the assumption that government tax revenues must hit a set level, and the government has a right to a fixed amount of the nation’s wealth.

The logic that each dollar you earn belongs first and foremost to the government rather than the taxpayer is grossly inaccurate.

The donors in this case are voluntarily contributing millions of dollars to help pay for the stadium of their Alma Mater or beloved college program. The city and state are not levying any form of new tax or using state revenue to fund the project, unlike several NFL teams.  While previous renovation plans for Husky Stadium relied on lobbying the state legislature for funds - leftover from the Evergreen State’s hotel tax increase – the failure to levy a rental car tax on Washingtonians in 2011 meant the university would have to seek non-taxpayer funding.

The university ultimately decided to use private donations, revenue generated by the stadium, and the school’s internal lending program: a decision that other professional and collegiate sports organizations can learn from. Taxpayers are not responsible for any portion of the stadium’s total cost because private funds and charitable donations are voluntarily agreed upon and given, not forced upon residents of the Evergreen State.

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Panthers, and Falcons, and Dolphins! Oh My!


Posted by Matt Blumenfeld on Friday, March 15th, 2013, 8:05 AM PERMALINK


Extravagant stadium renovations and construction seem to be the current trend among NFL teams. While these renovations are said to be for the “benefit” of the fans and city, the details of these costly changes get lost in the excitement. Inevitably, the state’s or city’s taxpayers are stuck with a good portion of the tab (as if paying at least $8 for a hot dog wasn’t bad enough). The most recent perpetrators aiming to game the taxpayers and fans for tax funds are the Carolina Panthers, Miami Dolphins, and Atlanta Falcons.

The Panther’s current renovation plan, set to begin after the 2013 season, calls for between $261 million and $297 million. Of that total amount, the organization is seeking roughly $206.5 million from the city and state through the doubling of the local restaurant and bar tax from 1 to 2 percent. The food and beverage tax hike levied against the city of Charlotte is expected to raise an estimated $143 million for upgrades. The Panthers are asking the state legislature for the remaining $62.5 million. In exchange, the team would be contractually bound to remain in Charlotte for 15 years. Not much of a bargain for taxpayers. Especially since Jerry Richardson’s Panthers made more than $100 million in profit over the last two fiscal years. Profit that could be used to upgrade Bank of America Stadium.

Similarly, the Miami Dolphins are planning a $400 million renovation to Sun Life Stadium. Stephen Ross, the owner of the historic Dolphins franchise, has pledged $201 million towards the project, and is calling upon the state to foot the rest of the bill. The other half of the funds, Ross hopes, would come from SB 306 – legislation that allows the state to designate exactly one "professional sports franchise renovation facility" to qualify for $3 million in tax rebates each year for 30 years to help fund renovations; a hotel tax increase from 6 percent to 7 percent, and HB 721 which grants sports franchise to receive a monthly distribution of sales tax revenues to improve conditions of facility to meet or exceed certain facility standards.

As the Sun Sentinel points out, the qualifications for the rebate state, “the stadium must be more than 20 years old, generate $3 million in sales tax annually and plan a renovation of $250 million or more where the team owners are willing to put up 50 percent of the cost.” As a matter of fact, the only team that could qualify for this is the Miami Dolphins. Rather than trying to stick half the renovation costs on taxpayers and fans, Ross should seek the extra capital from celebrity stock and partial team owners, such as Fergie and Marc Anthony who bought into the team a few years ago, and look to make it to the playoffs. Fins fans have been disappointed enough and don’t need matters made worse with the prospect of this financial burden.

The Falcons, on the other hand, want to build a brand new stadium to the costly tune of $1 billion. Atlanta Mayor Kasim Reed, who has proven to be no friend to the taxpayers of Georgia, has agreed to use $200 million in revenues collected through the hotel tax to fund the project. The Falcons organization would then fund the rest of the project. Additionally, $30 million from The Arthur Blank Family Foundation and Invest Atlanta will go towards building up the surrounding neighborhoods.

As it stands, the current Georgia Dome has only been open for 21 years, and has hosted some of the largest entertainment spectacles in the world. This deal must still be approved by the Atlanta City Council, World Congress Center board, Invest Atlanta and the Fulton County Commission in order for the project to move forward.

State officials claim a tax increase will not be needed to fund the project, but it’s up to Georgians to make sure they honor their word. Don’t be surprised if lawmakers in Atlanta within the next few years try to levy some form of tax increase to offset the use of funds.

The concept that these owners are failing to grasp is it’s these taxpayers that attend the games, fill the stadium on game day, and purchase the vast array of concessions and memorabilia. These tax increases will only deliver a negative impact on the average taxpayer by driving the cost of business operations up while discouraging fans from coming to see their team. Taxpayers and fans attend games because they support their team and have fun. Ticket prices are already increasing each season.  Do you really want to make them pay for the whole stadium as well?

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UPDATE: Joe Flacco's Taxes - Twitter Joust with ESPN's Darren Rovell


Posted by Matt Blumenfeld on Thursday, March 7th, 2013, 12:19 PM PERMALINK


If Joe Flacco does in fact live in New Jersey, his tax burden is actually 0.39 percent higher than originally estimated. The new tax rate is 52.37 percent. Meaning the Ravens star quarterback's tax liability is roughly $10.53 million.

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Tax Bite Leaves Flacco Second Best Paid in NFL


Posted by Matt Blumenfeld on Thursday, March 7th, 2013, 7:25 AM PERMALINK


As reported this week, Super Bowl MVP Joe Flacco and the Baltimore Ravens have agreed to a six-year, $120.6 million contract making the star quarterback the highest-paid player in NFL history, earning an estimated $20.1 million per year. But being the “highest paid player” and earning the most after tax pay are two very different things.

By choosing to remain a Raven, Flacco is now set to pay a combined marginal income tax rate of 51.98 percent. This overwhelming tax rate is composed of the federal, Maryland, and Baltimore County income tax rate, as well as the Medicare tax. And that’s excluding his “jock tax” liability for away games – play the Patriots at Gillette Stadium, pay Massachusetts income tax on earnings for that game - and other taxes levied against him such as Maryland’s property tax.

Given that Flacco is coming off of his best season, the franchise quarterback could have commanded a similar contract from any other team in the league while keeping a greater percentage of his contract. Four of the nine no-income-tax states have professional teams in need of the Super Bowl MVP’s caliber and skill.

State

Team

Federal Income

Tax Burden

State and County

Tax Burden

Total

Tax Liability

Maryland

Baltimore Ravens

$8.72 million

$1.72 million

$10.44 million

Texas

Dallas Cowboys

$8.72 million

$0

$8.72 million

Florida

Tampa Bay Buccaneers

$8.72 million

$0

$8.72 million

Tennessee

Tennessee Titans

$8.72 million

$0

$8.72 million

Florida

Jacksonville Jaguars

$8.72 million

$0

$8.72 million

The Federal Income Tax Burden listed above is composed of the 39.6 percent tax bracket and 3.8 percent Medicare tax. For illustrative purposes, the marginal combined tax rate of 51.98 percent (which includes Federal, State, Medicare, and Baltimore County tax rates) is applied only to his contract salary and does not take into account his bonuses, endorsements, and other sources of viable income.

Had Flacco sought a new contract with one of the teams listed above, he would have saved $1.72 million in total marginal tax liability. Flacco may have the distinction of being the highest paid player in NFL history, but New Orleans Saints’ QB Drew Brees still earns more after tax pay.

Brees’s contract, which he signed before last season, is a 5-year, $100 million dollar contract that pays around $20 million per year. After applying the marginal combined tax rate of 49.4 percent to the Saints QB’s contract salary, he stands to make $470,000 more after tax pay than the newly crowned “highest paid player.” Consider how much more Brees will earn if Louisiana Gov. Bobby Jindal successfully eliminates the Pelican State’s income tax. Don’t be surprised if players begin to consider their tax liabilities even more now when making the decision of which team to ultimately sign with.

Yes, the Ravens may have the personnel to repeat as Super Bowl champions next year after signing Flacco to his new deal, but football careers are relatively short and Flacco is not receiving the greatest return for his physical investment in the game as he pursues his second championship. For now, by virtue of living in tax-heavy Maryland, he’ll just have to settle for being compensated second best.

For PDF version, click here.

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ATR Opposes Pole Attachment Fee Hike in Tennessee


Posted by Matt Blumenfeld on Friday, March 1st, 2013, 2:19 AM PERMALINK


Two new bills – HB 1111 and SB 1222 – have been submitted to the Tennessee House and Senate that seeks to levy a “pole attachment fee” increase against cable and telecommunications providers to government-run utilities.

The current pole attachment fee for Tennessee is already 2.5 times the national average, at $17 per pole. The proposed legislation would almost double that rate to $33.

ATR has submitted a letter to Tennessee Senate Commerce and Labor Committee Chairman Sen. Jack Johnson and Tennessee House Business and Utilities Committee Chairman Rep. Pat Marsh.

The full letter can be read below.

March 1, 2013

 

Tennessee Senate Commerce and Labor Committee

Sen. Jack Johnson, Chair

Tennessee House Business and Utilities Committee

Rep. Pat Marsh, Chair

 

Dear Chairman Johnson and Chairman Marsh,

I write in strong opposition to House Bill 1111 and Senate Bill 1222, which would increase the rate paid by cable and telecommunications providers to government-run utilities. The “pole attachment fee,” paid in exchange to use utility companies’ electric poles to run cable and telecommunications lines, would increase to $33 per pole under this legislation. That is nearly five times the national average rate of $7 per pole, and would result in $20 million in additional fees being passed on directly to consumers.

Tennessee’s pole attachment fee is already 2.5 times the national average, at $17 per pole. These bills would nearly double that already exorbitant cost, raising telecommunications costs and stunting private investment. The private companies shouldering this burden are already struggling to invest in Tennessee, and to create jobs and spur development across the state. HB 1111 and SB 1222 represent massive barriers to private sector led growth.

During these difficult economic times, Tennessee families simply can’t the additional fees that will be passed on to consumers as a result of this legislation. With four years of tax increases coming out of Washington via Obamacare and other federal action, state government should give the people some relief from the burden of government, not increase its cost.

I urge you to oppose HB 1111 and SB 1222, and avoid imposing higher costs on the private sector to the benefit of a government-run monopoly.

If you have any further questions on this issue, please contact Tennessee state affairs manager Josh Culling at jculling@atr.org.

Onward,

Grover Norquist

President, Americans for Tax Reform

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The Necessity for a Constitutional Amendment in Washington


Posted by Matt Blumenfeld on Thursday, February 28th, 2013, 3:48 PM PERMALINK


In a 6-3 decision, smacking of judicial activism, the Washington State Supreme Court struck down the voter passed statute that requires a two-thirds vote of the state legislature to pass any form of tax increase. The court claimed that it violates the state constitution on the grounds that it “prohibits either the people or the legislature from passing legislation requiring more than a simple majority for the passage of tax legislation." The court further argued that if the legislature wants to formally adopt the two-thirds supermajority rule, they must pass a constitutional amendment to do so.

Not only should the members of the state legislature move forward with drafting this constitutional amendment, but they would be providing a disservice to their constituents if they didn’t.

In addition to the voters and taxpayers of Washington approving Initiative 1185 – a statute requiring a two-thirds legislative super majority to increase taxes – residents of the Evergreen State have approved two-thirds supermajority votes for tax increases four previous times over the last 20 years: 1993, 1998, 2007, and 2010. The statute must be continually approved by the voters of Washington, as the legislature is able to set it aside after two years have passed.

The continuous approval of the two-thirds supermajority rule shows that the taxpayers of Washington are holding their representatives to be fiscally responsible for the state’s budget.

To contact your state legislator and support a two-thirds supermajority constitutional amendment, click here

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ATR Calls on Kansas Legislators to Repeal Expensive Energy Mandates


Posted by Matt Blumenfeld on Wednesday, February 27th, 2013, 12:59 PM PERMALINK


 

ATR sent the follow letter to Kansas legislators today in support of House Bill 2241, legislation introduced by Rep. Dennis Hedke (R-99) that would reverse some of the economic harm done by the state’s renewable energy mandate: 

27 February 2013

House of Representatives

Kansas State Capitol

300 SW 10th St.

Topeka, Kansas 66612

 

Dear Members of the Kansas House of Representatives,

I write today in support of HB 2241, legislation which would amend the state’s costly renewable energy mandate so as to mitigate its negative impact on the economy. This bill is a good start toward reversing some of the damaging effects of the Renewable Energy Standards Act of 2009, which mandates that utilities in Kansas generate 20% of their electricity from more costly and less reliable sources of energy by 2020. HB 2241 would fully repeal the 20% mandate, delay the implementation of the 15% mandate, and give the Kansas Corporation Commission greater flexibility in managing the program.

Experience has shown us that renewable energy mandates, (like the one on the books in Kansas), hurt consumers. This command and control policy forces companies to procure energy from more costly and less reliable sources; with the increased costs passed on to consumers in the form of higher utility bills.

On average, states with a renewable energy mandate have electricity costs of over 40% higher than states that do not. In fact, a study by the Kansas Policy Institute found that the mandates would raise the cost of electricity for consumers by $644 million through 2020, which is an astonishing 45% increase. By unnecessarily driving up utility bills, renewable energy standards act as a hidden tax on individuals, families and businesses across Kansas. This destructive economic policy will result in less take-home pay and fewer job opportunities for your constituents (19,000 less jobs, according to the KPI study).

ATR urges you to support HB 2241, which you may be called to vote on this week. This legislation would soften the economic blow caused by the state’s costly energy mandate. Ultimately, it is imperative that lawmakers repeal the mandate all together. Legislators in Topeka should continue to focus on policies that allow the private sector to grow and create jobs. A good place to start is with full repeal of the state’s expensive energy mandate. If you have any questions or if American’s for Tax Reform can be of assistance in any way, please contact Patrick Gleason, ATR’s director of state affairs, at 202-785-0266 or pgleason@atr.org.

Onward,

Grover G. Norquist

President, Americans for Tax Reform

 

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Tax Competition: Why the San Diego Chargers Should Move to San Antonio


Posted by Matt Blumenfeld on Wednesday, February 20th, 2013, 3:15 PM PERMALINK


As seen in the Daily Caller, Matt Blumenfeld, State Policy Associate, expounds upon Texas Gov. Rick Perry’s recent comments about the San Diego Chargers relocating to San Antonio. From an economic standpoint, every member of the Chargers organization would see their tax liability decrease and after tax pay increase substantially:

“Texas is one of nine states without an income tax, which has made it a magnet for people and employers from other parts of the country. The Chargers’ current home state has one of the most inhospitable tax climates in America.”

Even the visiting teams stand to benefit from a potential move to the Lone Star “since professional athletes are required to pay what is known as a ‘jock tax’ in each state they play an away game. Texas has no income tax, and therefore no ‘jock tax’.”

Texas already is the top destination for Golden State tax refugees so the Chargers should simply follow the example set by their fans.

To read the article in its entirety, click here.

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