“Jock Taxes” Spread As State And City Government Try To Maximize Revenue For Nonresidents

A new report from the Tax Foundation analyzes the increasing popularity of “jock taxes” and reveals how state governments are extending their income taxes to more and more nonresidents who just work for a few days in their states, focusing especially but not exclusively on professional athletes.

The report is released to coincide with Major League Baseball’s All-Star Game in Chicago, where Illinois’s unique application of the jock tax will be on display. Illinois is the only state that does not impose its income tax on visiting players if they come from states that do not tax Illinois athletes. That lets players from Texas, Florida and Washington off the hook. Everyone else will have to pay Illinois first, and then try to get a credit for those payments from their home states.

“When Florida Marlin Dontrelle Willis replaced Los Angeles Dodger Kevin Brown in the All-Star lineup,” commented David Hoffman, Tax Foundation economist and author of the new report, “baseball was happy, but Illinois lost over $2,200 in revenue.”

Despite its fair treatment of visiting players from states with no jock tax, Illinois is less forgiving to its own athletes, refusing to give credits for out-of-state jock taxes paid. No other state refuses credits, and this policy results in double taxation on most away games for Chicago personnel. For example, during last year’s All-Star Game in Milwaukee, Chicago players Sammy Sosa and Paul Konerko paid both Wisconsin and Illinois taxes on their daily income during the All-Star break.

“The jock tax began with California trying to get back at Michael Jordan for beating the Lakers in 1991,” said Hoffman, “and Illinois fought back with a retaliatory tax the next year. Ironically, if Jordan rejoined the Bulls in any capacity, he would find himself paying double taxes.”

Hoffman points out that a half a dozen cities have also passed their own jock taxes, and he gives three major reasons the jock tax is ill-conceived:

— The tax is poorly targeted. Advertised as one that hits only ultra-rich athletes, the jock tax has quickly spread to many people with moderate incomes, such as trainers and scouts, and to other professions.

— The tax is arbitrary. Professionals in other occupations with comparable incomes over their working lives, such as doctors and corporate executives, are not penalized by a “doc tax” or “exec tax,” though that is changing. New Jersey has recently started taxing visiting lawyers.

— The tax imposes an unrealistic administrative burden on people who have to file more than a dozen state income tax returns.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.