D.C. to Seek New Tax Revenue from Courts, Diamonds and Fields

April 20, 2011

Perhaps frustrated by the Washington Wizards’ losing 23-59 season record, the D.C. City Council has decided to unleash its tax wrath on professional athletes from other cities with a proposed “jock tax.” Under this proposal, players would have to pay D.C. income taxes for the one or two days that they are in town for a game. One day’s worth of income taxes might not sound like a lot, but for the highest paid major league players, even a single day’s worth of an annualized 8.5% (D.C.’s current top income tax rate) can be an attractive sum. As Tom Howell, Jr. points out in today’s Washington Times, the practice has become rather popular at the state level:

Most states tax pro athletes for games at their sporting venues, because they are technically working and earning their keep. The athletes are easy targets for the revenue generator because they are high-earners, everyone knows their salaries and their activities are easy to track.

Just because it’s popular, of course, doesn’t make it a good idea. Howell goes on to quote Tax Foundation President Scott Hodge who proceeds to refute the case for such a tax.

In opposition, Mr. Hodge said the jock tax singles out a profession, forces people to pay taxes in areas where they have no congressional representation and can trickle down to lower-level athletes. Proponents of the tax, he said, “do not realize this extends to people on these clubs who aren’t making the multimillion-dollar salaries.”

[…]

Mr. Hodge [added] that the stack of tax returns for each state can be “a nightmare,” especially for athletes who cannot afford professional help, and there is precedent for home states shifting their tax-credit rules.

And for those who find it difficult to get indignant about the tax complications faced by pro athletes, remember that not everyone in the pros is making LeBron James levels of cash. As long as the tax statute applies to all professional athletes and not just those in the major leagues, that theoretically includes everyone from NBA superstars to AAA baseball rookies making $32,500 a year to anyone who gets paid to play a sport and ends up doing so outside of their home state.

In addition, there is a demonstrated slippery slope in pursuing this type of tax – some states have extended jock taxes to visiting musicians, lawyers, and touring skateboarders. In this case, however, there is a significant obstacle in the way of the D.C. City Council’s plan – the U.S. Congress. The D.C. Home Rule Act of 1973 prohibits the city from imposing a tax on nonresidents, such as past proposals to impose a commuter tax on people who work in the District but live in the surrounding Maryland and Virginia suburbs. According to D.C. Council member Jack Evans, the plan will be lo lobby Congress to amend the existing law to specifically allow such taxes on “professional athletes.” If that were to happen, the floodgates would be open.

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