It’s Super Bowl Sunday this weekend and, once again, the Vikings will be watching it at home. It is also budget season at the state Capitol, with Gov. Tim Walz looking to increase Minnesota’s taxes, already some of the highest in the United States. Are the two related?
In a 2018 paper titled ‘Touchdowns, Sacks and Income Tax – How the Taxman decides who wins the Super Bowl, economist Matthias Petutschnig looked at data for a 23-year period from 1994 to 2016 and found “a significant negative relation between the amount of the net (after-tax) salary cap represented by the personal income tax rate of the teams’ home states and the success of the teams.”
Why would tax rates matter for results? The NFL’s salary cap limits what each team can spend on player salaries. The cap is $198 million this season, an average of $3.7 million per player for a 53-man roster.
But that is gross pay; it doesn’t take state income taxes into account. In higher tax states, like Minnesota, a greater share of that gross income is swallowed up by state taxes than in a lower tax state like Florida. So, to offer the same net pay as a Florida team, a Minnesota team must offer higher gross pay. But that comes out of the $198 million cap, reducing the amount available to attract other players: “This reduces the average talent level of the whole roster of a team in a high tax state and diminishes its chances of winning,” Petutschnig says.
Another paper supports this finding. ‘State Income Taxes and Team Performance: Do Teams Bear the Burden?’ by economist Erik Hembre investigates “the effect of income tax rates on professional team performance using data from professional baseball, basketball, football, and hockey leagues.” “Regressing income tax rates on winning percentage between 1995 and 2017,” he writes, “I find robust evidence of a negative income tax effect on team performance.”
[image_caption]John Phelan[/image_caption]
As Minnesota’s legislative session proceeds in St. Paul, questions of tax and spending are to the fore. When considering how much of their residents’ income they are going to try to take in tax, policymakers might want to consider the effect on our state’s long-suffering sports fans.
John Phelan is an economist at the Center of the American Experiment.
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Is this piece meant to be taken seriously? My takeaway is that if taxpayers had not invested heavily in US Bank Stadium then the Vikings would have moved to Sioux Falls and would have signed Tom Brady and won a Super Bowl.
I do believe that state income tax rates do have some impact on where free agents sign. But this paper is hot garbage. Its high school level work.
Professional players don’t just pay income tax in the state where their team is based. They pay taxes in every state where they plays. When teams from Texas and Florida come to Minnesota to play the Vikings, their players pay Minnesota state income tax. This has the effect of significantly lessening the disparities in state income tax rates.
https://www.google.com/amp/s/www.forbes.com/sites/kurtbadenhausen/2017/04/18/income-taxes-for-pro-athletes-are-reminder-of-how-complicated-u-s-tax-code/amp/
The paper also ignores a lot of other variables. For example, city size, location or weather. For players from the south, playing in Miami has a lot more appeal than playing in Minnesota. Playing for the Los Angeles Lakers or Boston Celtics is a lot more desirable than playing for the Utah Jazz. I’m not sure its something you can’t quantify, but its very real.
When I realized the article was seriously suggesting that we lower taxes so we can have better sportsball teams, I realized the author must’ve been from the CAE.
Yup.
Laughable. Notice it is a paper and not a publication (meaning no one would publish the drivel).
Our friends out east who play in “Taxachusetts” seem to buck the trend. If memory serves, they’ve won that big game an unusual number of times over the last 20-some years.
This is meant as a joke, right?
When was the last time anyone saw something that wasn’t garbage emerge from pseudo intellectual wannabe academics at CAR? By the way, does anyone actually know what if any MN income taxes any of these guys pay since few if any of them are MN Residents? I seem to recall coming across some information back during the Stadium arguments that these athletes actually contribute a very small proportion of their salaries to the MN tax rolls because they’re NOT Residents.
I like a good April Fool’s joke, and the CAE is often one as an organization, but the jokes work much better if they’re delivered on April 1st instead of in February.