Professional athletes have seen their contracts rise to record highs in recent years. But they’re also hit by a unique tax rule that forces some of the top stars to pay thousands in multiple US states.
The rule is colloquially known as the ‘Jock Tax’ which taxes players for the income earned for playing games in different states.
Income tax is common among most U.S. states. Performing work outside your own state may also cause individuals to pay tax in those states, but athletes are unique because they’re prominent figures making millions of dollars and there’s public knowledge of when they do their work in a specific state.
Because many athletes make tens of millions every year, they could make a few hundred thousand dollars for a single game. State governments take a piece of that pie.
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The origins of the Jock Tax are unclear as several sources have said the rule has existed since the 1960s or 1970s. However, the lore of what made the tax a widespread phenomenon is the same, and it roots from the first of six titles of NBA legend Michael Jordan.
Jordan, playing for the Chicago Bulls, defeated the Los Angeles Lakers to win the NBA Championship in 1991, then was subsequently taxed by the state of California. Illinois wasn’t happy that their superstar was being penalized, so they decided to take an eye for an eye and began taxing other athletes for games. They called the tax law ‘Michael Jordan’s Revenge.’
Most states have already adopted the Jock Tax. On average, NFL players file 8 to 12 tax returns, NBA players file 16 to 20, and MLB players file 20 to 25, according to CNBC.
