BALTIMORE, MD – Last week Joe Flacco of the NFL champion Baltimore Ravens became the highest paid player in professional football – or did he? The Super Bowl MVP and the Ravens agreed to a six-year, $120.6 million contract, earning an estimated $20.1 million per year.
But like lesser-paid Americans see on their payroll stub every week, Flacco was only the highest paid player in the NFL until taxes were figured in. Because Joe Flacco earns his living in Maryland and Drew Brees throws the pigskin in Louisiana, the title of highest “earning” player in the NFL remains with Brees.
Because Flacco plays for the Ravens in Baltimore, he pays a combined marginal income tax rate of 51.98 percent. That combined rate includes federal, state, and county income taxes claiming over half the quarterback’s salary before he ever sees it. That doesn’t include so called “jock taxes” when the Ravens play the Patriots in Foxboro, where Massachusetts levies state income taxes on earnings of visiting athletes.
Flacco may have the distinction of being the highest paid player in NFL history, but New Orleans Saints’ QB Drew Brees still earns more actual “income.” Brees’s contract is a five-year, $100-million deal 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.”
If Louisiana Gov. Bobby Jindal is successful in getting the state legislature to eliminate the state income tax, Brees will earn even more. There is little doubt that franchise players will think long and hard about where they choose to sign as tax rates continue to soar.
The purpose of this little tax tale is not to elicit sympathy for a man who will still make millions after taxes. But it does illustrate in a highly visible way what small business people face every day. From the outside they may look wealth,y but many of them face every day the decision whether staying where they are and doing what they do is really worth it.