Tax increases could factor into MLB negotiations
BY RONALD BLUM Associated Press
Sunday, November 25, 2012
11/25/12 at 6:28 AM
Team executives and agents wandered into the Agave Sunset lounge at the resort where the general managers' meetings were held in Indian Wells, Calif. Four of the six flat-screen televisions were showing election coverage, with the other two turned to sports.
President Barack Obama's victory over Mitt Romney was of as much interest to baseball's money men as the game scores, given the millions of dollars routinely guaranteed in player contracts these days.
As free agents negotiate deals this offseason, tax policy is an area that comes up along with the usual issues. Some players are wrangling for as much money as they can get before the end of the year to avoid a take hike in 2013.
"Front-loading would make sense if at all possible as tax rates will definitely go up on January 1st on all high-income taxpayers," agent Greg Genske said in an email.
This much is known for now: Starting Jan. 1, there is an additional 0.9 percent Medicare tax on wages above $200,000 for individuals and $250,000 for married couples filing jointly under the federal Affordable Care Act, a rise to 2.35 percent.
In addition, the Bush tax cuts are scheduled to expire at the end of the year, which could raise the highest marginal federal tax rate from 35 percent to 39.6 percent - although a deal between Obama and Congress could change that.
Oakland Athletics general manager Billy Beane figures agents will be on top of the changes - but the results of negotiations about the so-called fiscal cliff are unpredictable.
"I think if you're hopping around the potential of tax reform, you're probably chasing your tail," Beane said.
With baseball contracts worth as much as $275 million (Alex Rodriguez) and the major league minimum $480,000, tax policy affects every player who spends most of the season in the big leagues.
According to an analysis done by a tax lawyer on the staff of agent Scott Boras, a player with a $10 million salary and average deductions who plays in Florida and is a resident of that state will see his taxes rise from $3.45 million this year to $4.09 million next year under current law. If traded to the Blue Jays, that player's 2013 tax would rise to $4.27 million. And if dealt to a California team, the tax would go up to $4.4 million.
By moving money from salary into signing bonuses, players can sometimes lower their state tax bills. Shifting money into December this year could reduce federal taxes.
"Tax measures are going to be discussed, but change most likely carries compromise on both sides," Boras said.
Original Print Headline: Tax policy could factor in MLB negotiations