Jock Taxes: Pros and Cons

In the previous article, we have already understood what Jock Taxes are. We also had a closer look at the reason why states levy jock taxes. However, there are many experts who believe that levying jock taxes is counterproductive. This is because of the fact that there are more disadvantages associated with jock taxes as compared to the advantages.

In this article, we will have a closer look at some of the pros and cons related to jock taxes.

The details of the pros and cons have been listed below:

Advantages of Jock Taxes

The advantages of levying a jock tax are as follows:

  1. Raising Funds for Building Infrastructure: In many places around the world, governments contribute extensively towards building sporting infrastructure. It is common for governments to spend millions of dollars in order to build sporting infrastructure. They are not able to recover all the money through ticket sales. Hence, governments need another source of funding from where they can recover the money spent on building sporting infrastructure.

    Since the jock tax is levied on the income which is generated within the state, the income tax authorities of the state are within their bounds when they impose such a tax. If the governments use the money generated from sports in order to further develop sporting infrastructure within the state, such a tax may be justified to some extent.

  2. Redistribution of Tax Income: It also needs to be noted that in the absence of jock taxes, all the money earned by the athlete ends up being taxed in one state only. This would lead to lopsided development as a handful of states will be able to corner all the taxation revenue.

    Jock taxes, on the other hand, make it possible to redistribute this tax income amongst states. Hence, a few states are not able to corner the earnings. Also, the taxes charged by one state result in tax credits being given to the athlete. As a result, double taxes are not paid by the athlete. The end result is that the athlete pays roughly the same amount in the form of taxes but the amount is distributed amongst a larger number of states.

Disadvantages of Jock Taxes

The disadvantages related to jock taxes are significantly more as compared to the advantages. The details of the disadvantages are as follows:

  1. Complex Calculations: First and foremost, the process of filing jock taxes can be incredibly complex. The person filing the taxes needs to be aware of the tax rules in all the states. They need to be aware of the different tax rates, and the different deductions and must also be aware of the complexities of interstate taxation.

    The athlete will obviously not be aware of all these details. Hence, they are required to engage professional accountants to file these taxes. The fees that need to be paid to professional accountants can be quite significant. Also, it doesn’t necessarily have to be paid by athletes who make millions. Even coaches, trainers, and other staff who do not earn millions of dollars have to deal with these complications.

  2. Different Tax Rates: In most parts of the world, the rate at which jock tax is applied varies across states. There is no uniform rate at which this tax is applied. Hence, the tax liability of the athletes can change significantly based on the venue where the matches are being scheduled. The end result is that even though athletes may receive the same gross pay, their net pay can vary significantly based on the jock taxes being charged to them.

    There have been some states that have been sued by athletes since the athletes claimed that the amount of taxes owed by them was more than the total amount of money that they earned from that state!

  3. Complexity in Match Schedule and Travel Schedule: Over the past few years, athletes have become very sensitive when it comes to jock taxes. They have lost a large chunk of their payroll because of this tax. As a result, they insist that the match schedules and travel schedules be prepared in such a way that the time spent in jurisdictions where the jock tax is highest is reduced or even eliminated.

    Since there are multiple teams and hundreds of players involved, the end result is that planning the match schedule as well as the travel schedule becomes an increasingly complex exercise.

  4. Increased Athlete Wages: Over the years, athletes have realized that a significant portion of their pay gets deducted in the form of jock taxes. Hence, in order to cover the increased expense and to obtain a higher net pay, athletes have started demanding higher wages.

    Hence, in effect, jock taxes are only pushing the wages higher which is ultimately leading to an increase in the price of tickets.

  5. Tax Wars Between States: Another problem related to jock taxes is that it is creating a situation wherein states are aggressively bidding against one another. This is being done by the states to ensure that the business stays with them.

    There are some states like Florida which have aggressively cut down jock rates in order to attract more sporting leagues. However, the end result is unhealthy competition which benefits wealthy billionaires instead of benefitting the people at large.

Thus, it can be said that jock taxes have more disadvantages than they have benefits. However, they are still widely prevalent across the United States and even the entire world.

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Sports Management