Are taxes why Kung Fu Panda left San Francisco for Boston?
Tuesday, November 25, 2014
Major League Baseball fans on opposite sides of the United States are going to have very different Thanksgivings this year.
In Boston, Red Sox Nation is very thankful for their team's signing this week of two of the sport's biggest free agents, third baseman Pablo "Kung Fu Panda" Sandoval and Hanley Ramirez, who plays (for now) shortstop.
Click image for MLB.com story and video on Boston's blockbuster player acquisitions.
San Francisco and Los Angeles baseball fans, meanwhile, will be crying in their turkey dinners.
Exact contract details for the pair haven't been released. However, Sandoval reportedly signed a five-year contract worth $95 million, plus a club option for a sixth year. Ramirez's deal reportedly is for $88 million over four years with a $22 million vesting option for a fifth year.
Not to dis Ramirez; he's a fine player and I'm sure the Los Angeles Dodgers fans are quite distraught with the loss of their infield star. But let's focus on the Panda, mainly because he's leaving a team that's consistently collected World Series rings. Sandoval was a major reason for the Giants' three MLB championships in five years.
Rings and parades certainly are nice. But those things can be enjoyed in every major league city.
And as all sports fans know, the iconic Jerry Maguire tagline is true. Every athlete (and agent) wants to be shown the money.
In Sandoval's case, the different tax systems in Massachusetts and California mean he will be seeing a lot more cash in his bank account.
State tax bottom line: I'll let K. Sean Packard, whom I've spoken with before (most recently for my athletes in tax trouble story), explain. This time Packard's analysis, in which he calls the Panda's decision to move across the country a no-brainer, is in Forbes:
Massachusetts has a flat personal income tax rate of 5.2%. California uses a progressive rate topping out at 13.3% at and above $1 million of income. In other words, 95% of Sandoval's income would be taxed at this 13.3% rate if he re-signed with the Giants.
The Giants play in the National League West, which boasts three teams from California, including the Giants. This means that in addition to the Giants' 81 home games, the team plays another 18 road games in California. The Giants also play three road games against their cross-bay rival A's, bringing their total California games to 103. While Boston has to play ten games next year at the New York Yankees, it also has division opponents in Florida and Canada, where the players will pay no state income taxes (and no federal taxes in Canada).
We don't have to do the jock tax math, thanks to Packard. I suspect similar calculations were shown to Sandoval by his tax and financial advisers. Ditto Ramirez, who also will be leaving a lot of California taxes behind.
Congrats to the Boston faithful. Sorry Giants fans. And good luck to both players, except when the BoSox meet my Baltimore Orioles!
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