Upset that your favorite basketball or hockey team is watching the playoffs from their sofas? A UIC professor says a state’s tax burden shares some of the blame.
University of Illinois at Chicago professor Erik Hembre has released a working draft that shows a professional team in a state with high income taxes could win up to four fewer games in an 82 game season compared to a team in a state without income taxes. This is because the better players are more likely to gravitate toward states that allow them to keep more of their money.
Hembre found that, since the mid-1990s, a 10 percentage point increase in income taxes means anywhere from a 1.9 to 3.0 percentage decrease in winning percentage. That formula also takes into consideration other factors such as the weather in Miami being warmer than Minneapolis in January.
The logic behind this, Hembre said, is that players in free agency are being offered deals from states with no income tax that are, all other factors aside, more competitive than other teams because a player would be able to keep more of their salary.
“There’s been this negative correlation between income taxes and winning percentage in both the NBA and the NFL every single year for the past 20 years,” Hembre said. “It’s not saying that income taxes are the only factor. It’s saying that income taxes are a factor, just like the weather. Every single year for the past 20, there’s been this negative correlation, and it’s been growing in the NBA.”
He said the results are more pronounced in sports such basketball, football and hockey because they have salary caps that give free-agent signings more impact.
But agent Michael Naiditch, founder of Chicago-based N.E.T. Sports, thinks players don’t care about their tax burden as much as they should.
“Basketball players often live pretty well, and I think they care more about lifestyle than they do about savings,” Naiditch said.
Decisions on where sports’ free agents decide to sign also is more complicated than money. Factors like weather, family and winning championships all cloud the data, Naiditch said.
A professional athlete also has to file taxes with states other than their place of residence. Some states have what is commonly known as the “jock tax,” which taxes an annual percentage of a player’s total income based on the days they performed in each specific state.
According to 2016 data from the Bureau of Labor Statistics, hundreds more professional athletes live in Florida than any other state because of it not having an income tax.