Jock Tax”: Players Always Lose in an Unfair Game
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THE PENNSYLVANIA STATE UNIVERSITY SCHREYER HONORS COLLEGE DEPARTMENT OF ACCOUNTING THE “JOCK TAX”: PLAYERS ALWAYS LOSE IN AN UNFAIR GAME JUSTIN W. TAYLOR FALL 2012 A thesis submitted in partial fulfillment of the requirements for a baccalaureate degree in Accounting with honors in Accounting Reviewed and approved* by the following: Rick Laux Assistant Professor of Accounting Thesis Supervisor Orie Barron Professor of Accounting Honors Adviser * Signatures are on file in the Schreyer Honors College i ABSTRACT Modern professional athletes are some of the most recognizable and well-paid members of society in the United States. While their biggest fans are the devoted followers that fund the growing professional sports industry, tax administrators from states and cities across the country are also watching their every move. Since the early 1990s, collectors at the state and local level have enforced the “jock tax,” an individual income tax specifically targeting visiting professional athletes. Experts consider the policy to be both inefficient and discriminatory in nature, as it targets athletes based solely on their profession and increases the compliance burden for all affected parties. Still, taxing authorities have found that the additional revenue raised outweighs the cost of enforcement, and there are no signs that any change in policy is imminent. This thesis studies the hypothetical effects of the “jock tax” on NFL personnel during the 2012 season. It seeks to determine how much excess income tax team employees will incur and whether these amounts provide further evidence that the tax is poor policy. In addition, the paper will analyze which teams are the most and least beneficial for athletes to play for from a tax perspective. Lastly, this thesis will test the assertion that fans, media, and perhaps even team members themselves have an incorrect understanding of how taxes should affect the employment decisions of professional sports team personnel. ii TABLE OF CONTENTS List of Figures ……………………………………………………………………………………………………………………………………….. iv Acknowledgements ……………………………………………………………………………………………………………………………….. v Chapter 1: Introduction ................................................................................................................................ 1 Chapter 2: History of the “Jock Tax” ............................................................................................................. 4 Chapter 3: Application of the “Jock Tax” ...................................................................................................... 7 Key Terms .................................................................................................................................................. 7 Calculation ................................................................................................................................................ 8 Enforcement ........................................................................................................................................... 14 Chapter 4: Previous Research ..................................................................................................................... 14 Chapter 5: Development of Hypotheses ..................................................................................................... 15 Chapter 6: Hypotheses ................................................................................................................................ 17 Chapter 7: Design of Model ........................................................................................................................ 18 Assumptions ............................................................................................................................................ 19 Chapter 8: Results ....................................................................................................................................... 22 Chapter 9: Conclusions ............................................................................................................................... 30 Hypotheses Revisited .............................................................................................................................. 30 Related Topics ......................................................................................................................................... 36 Effect on NFL Teams............................................................................................................................ 36 Effect on Other Leagues ...................................................................................................................... 37 Effect on Other States ......................................................................................................................... 38 Chapter 10: Conclusion ............................................................................................................................... 40 Appendix A: Arizona Cardinals .................................................................................................................... 43 Appendix B: Atlanta Falcons ....................................................................................................................... 44 Appendix C: Baltimore Ravens .................................................................................................................... 45 Appendix D: Buffalo Bills ............................................................................................................................. 46 Appendix E: Carolina Panthers .................................................................................................................... 47 Appendix F: Chicago Bears .......................................................................................................................... 48 Appendix G: Cincinnati Bengals .................................................................................................................. 49 Appendix H: Cleveland Browns ................................................................................................................... 50 Appendix I: Dallas Cowboys ........................................................................................................................ 51 Appendix J: Denver Broncos ....................................................................................................................... 52 Appendix K: Detroit Lions ........................................................................................................................... 53 Appendix L: Green Bay Packers................................................................................................................... 54 Appendix M: Houston Texans ..................................................................................................................... 55 Appendix N: Indianapolis Colts ................................................................................................................... 56 Appendix O: Jacksonville Jaguars ................................................................................................................ 57 Appendix P: Kansas City Chiefs ................................................................................................................... 58 Appendix Q: Miami Dolphins ...................................................................................................................... 59 Appendix R: Minnesota Vikings .................................................................................................................. 60 Appendix S: New England Patriots .............................................................................................................. 61 Appendix T: New Orleans Saints ................................................................................................................. 62 Appendix U: New York Giants ..................................................................................................................... 63 Appendix V: New York Jets ......................................................................................................................... 64 Appendix W: Oakland Raiders .................................................................................................................... 65 Appendix X: Philadelphia Eagles ................................................................................................................. 66 Appendix Y: Pittsburgh Steelers .................................................................................................................. 67 iii Appendix Z: St. Louis Rams ......................................................................................................................... 68 Appendix AA: San Diego Chargers .............................................................................................................. 69 Appendix BB: San Francisco 49ers .............................................................................................................. 70 Appendix CC: Seattle Seahawks .................................................................................................................. 71 Appendix DD: Tampa Bay Buccaneers ........................................................................................................ 72 Appendix EE: Tennessee Titans..................................................................................................................