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Nonresident State and Local Income Taxes in the United States: The Continuing Spread of “Jock Taxes”

2 min readBy: Scott Hodge, David Hoffman

Download Special Report No. 130

Special Report No. 130

Executive SummaryWhen the 2004 Major League Baseball All-Star Game is played on July 13 at Minute Maid Park in Houston, most people will be paying attention to the players, the game and the surrounding festivities. But at most All-Star Games, there is one group of people who pay more attention to taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. forms than to baseball. They are the many state tax officials across the country who keep track of the players’ salaries and see to it that they fill out the proper individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. forms to pay the “jock tax.”

That will not be an arduous task this year, as it has been in previous years, since the host state, Texas, does not have an income tax and therefore has no jock tax. In previous years, states reaped the financial benefits of hosting the All-Star Game not only in the obvious ways, but also by imposing a tax informally known as the jock tax on all visiting team employees— players, announcers, managers, trainers, etc. In 2003, Illinois hosted the All-Star Game and required visiting players and other team em-ployees to pay the jock tax—Illinois’ state income tax—on the income they earned during the weekend of the game. Although the visiting players, coaches and support staff are just like anyone else whose work brings them to Illinois, the tax law treats them differently. It requires all visiting athletes and other team employees to pay state income taxes for the day of the game, as well as the rest of the weekend. The tax is due even if a player does not set foot on the field.

The premise of the jock tax is that an athlete should pay taxes on money he earns while working in a state where he does not reside. One might assume, then, that since a person can work in only one state at a time, players who work in income tax-free Texas during the 2004 All-Star Game will not be simultaneously working in their home state and will therefore not have to pay any income taxes for the weekend of the game. This, however, is not the case. The only All-Star Game participants who will escape income taxation for the weekend of the game are those who hail from Florida or Washington—states that do not have an income tax—and, of course, the Texas Rangers and Houston Astros.