The Washington Times recently reported that the D.C. Council’s plan to introduce a “jock tax” will need an unlikely vote from Capitol Hill to succeed. Hopefully for D.C. sports fans the proposal will fail.
What is a “jock tax,” you might ask? It is an income tax levied on non-resident professional athletes who perform within the state or city imposing the tax. Some sources report that the tax was first introduced by California as revenge against the champion Chicago Bulls for defeating the Los Angeles Lakers in the NBA finals. Illinois followed suit with their own jock tax, and things have snowballed since.
D.C. is in a unique position because while three major sports teams play within city limits, most of their players reside in nearby Virginia or Maryland. The D.C. Home Rule Act of 1973 prohibits taxing non-residents, thus D.C. can only collect income taxes from pro athletes who live in the district. While it may seem reasonable to tax athletes who play within the city, in reality it would create arbitrary and unfair rules and costs, provide a slippery slope toward taxing other non-residents, and might just drive teams out of the city in the long run.
The first problem with the jock tax is that it necessitates the creation of rules that will likely end up being unfair. Are just the athletes to be taxed or will it include coaches and trainers, too? How about the much lower paid members of the staff that travel with the team? Even more arbitrary is the question of how much income a player makes per game in a city: do you divide the number of games played by salary per year? The salary divided by games played is easy to compute but hardly fair. Take for instance D.C. fan favorite Brooks Laich, who changed a fan’s flat tire right after a devastating playoff loss. Mr. Laich will make $4.5 million to play for the Washington Capitals NHL team this year. In order to play professionally every winter, Laich must train for 24 hours a week in the off-season in Canada. During the season the team will require him to practice daily, discuss strategy, and watch game film in Arlington, Virginia. Is it fair to tax Brooks Laich in a manner that would treat his yearly income as half earned during home games in D.C.? While it may be easy to say that Laich can afford the unfairness, countless other players, such as temporary minor league call-ups, would be forced to pay the same big taxes.
The second big problem with the jock tax is that it would tempt D.C. lawmakers to start down a slippery slope of taxing other professionals – including musicians, lawyers, and doctors – that earn income in the city but reside elsewhere. This is not an unfounded fear, either; other states have already increased the scope of their jock taxes in similar fashions. If D.C. were to levy income taxes on professionals who commuted to the city to work, many businesses would find it cheaper to just relocate to Virginia or Maryland to avoid high D.C. income taxes. This would cripple many district businesses that rely on the commuting professionals for their main source of income.
The last, and probably biggest problem, should cause fear in all D.C. resident sports fans: if taxed too much, teams might leave the city in the long-run. The higher the tax players must pay, the higher the salary teams will need to pay to attract players. If teams are faced with needing new arenas, they will make the decision to build in the area with the highest benefits and lowest costs. While this likely would involve a whole host of criteria, taxes would still play a significant role. It is not hard to imagine the Verizon Center or Nats Park becoming outdated someday and there needing to be a decision about where to build. Hopefully at that time taxes won’t get in the way of D.C. sports teams playing in D.C.
To pass the jock tax, the D.C. Council will need Congressional approval to amend its tax code within the city’s charter. Area sports teams and politicians in Virginia and Maryland have already spoken out against the proposal and it looks like there won’t be enough support to pass the legislation. With the above three big strikes against it, D.C. lawmakers should rule out the jock tax.
