When trying to educate people about taxes, I often share this visual showing a taxpayer trying to figure out whether he should try to earn more income.
The simple message is that a taxpayer is more likely to choose to earn more income if the tax rate on that additional income (i.e., the marginal tax rate) is modest.
But if tax rates become onerous, the incentive for productive behavior is greatly diminished.
Speaking of onerous tax rates, we have some horrifying details about what will happen to the players in today’s Super Bowl.
Here’s some of what Michael McCann and Robert Raiola wrote for Sportico.
California has the highest income tax of any state, with a top marginal rate of 13.3% on wage income and capital gains that exceed $1 million a year. The top rate for wage income climbs to 14.6% when including the State Disability Insurance rate, which has no wage cap. The state income tax is in addition to other taxes, including the federal income tax… Winning players will be paid $178,000 while losers will receive $103,000. This is a function of Article 37 of the collective bargaining agreement between the NFL and NFLPA. …That’s pretax, of course. It’s also in addition to taxes on players’ NFL earnings that are considered taxable under California law. Like other states with “jock taxes,” California taxes non-resident pro athletes a percentage of their income based on “duty days” spent in the state. …The Patriots and Seahawks traveled to California on Sunday, meaning they’ll have at least eight duty days in California (Sunday to Sunday).
So what does that mean?
Just as I wrote 10 years ago, for some players, it means their marginal tax rates on their Super Bowl bonuses will be greater than 100 percent!
To illustrate potential taxes owed by Patriots and Seahawks players to California, let’s consider Maye and Darnold, relying on Spotrac for salary and bonus data. …we anticipate that Maye—who signed a four-year, $36.6 million rookie deal in 2024—will pay about $186,000 to California in taxes if he wins the Super Bowl. …He and his Patriots teammates will take home an additional $178,000 for winning the big game. Darnold, who is in his eighth NFL season, has a much more lucrative contract than Maye. Last year Darnold signed a three-year, $105 million deal with Seattle, which included a $32 million signing bonus and $5.3 million in 2025 base salary. …We project that Darnold will pay about $249,000 in taxes to California if the Seahawks defeat the Patriots.
To be sure, this does not mean that players won’t have an incentive to win today’s game. I’m sure it will still be a profitable outcome when you factor in future contracts, endorsement deals, and other benefits.
Moreover, the Super Bowl bonuses are often just a small fraction of overall compensation, especially for top players like starting quarterbacks.
But it’s nonetheless outrageous when California politicians benefit more than players.
P.S. There is something that can be done to fix this injustice.
When it’s time to negotiate a new deal, the players’ union should insist that the Super Bowl is always played in low-tax states, preferably states like Florida and Texas with no income taxes.
