Baltimore Ravens quarterback Joe Flacco recently cashed in on his Super Bowl winning performance by becoming the NFL’s highest paid quarterback with a new six-year, $120.6 million contract. But despite the large salary, Flacco will actually take home less than expected due to a huge tax burden. Without diving into a deep political battle, let’s just say we bet Flacco wishes he had hired one of the many out of work Tax LLM’s for some advice on this new deal.
Americans for Tax Reform broke down the tax details of Flacco’s new deal and it turns out he will pay a combined marginal income tax rate of 51.98 percent his overwhelming tax rate is composed of the federal, Maryland, and Baltimore County income tax rate, as well as the Medicare tax. And that’s excluding his “jock tax” liability for away games. His federal income tax burden is a whopping $8.72 million, but he must pay an additional $1.72 million in state and local taxes for a total of $10.44 million in taxes per year.
Had Flacco tested free agency and gone to some teams in need of a quarterback like, say, the Cowboys, Buccaneers, Jaguars, or Titans who all play in states with no state income tax then Flacco would save $1.72 million per year.
ATR also looked at Drew Brees’s contract, which he signed before last season. It is a 5-year, $100 million dollar deal that pays around $20 million per year. After applying the marginal combined tax rate of 49.4 percent to the Saints QB’s contract salary, he stands to make $470,000 more after tax pay than Flacco, the newly crowned “highest paid player.” Consider how much more Brees will earn if Louisiana Gov. Bobby Jindal successfully eliminates the Pelican State’s income tax. Don’t be surprised if players begin to consider their tax liabilities even more now when making the decision of which team to ultimately sign with.