Sports Star Agents Anticipate Obama Tax Hike

Going once, going twice... signed by the major league baseball team willing to pay a signing bonus before December 31st.

That is what we might hear from baseball players' agents after they have considered the real possibility that Barack Obama's intention to hike the tax rate on the wealthiest Americans will impact their clients.

You see, the current minimum yearly salary for a big league player is $400,000. That puts the lowliest of bench warmers and pinch hitters into the top 1% of all wage earners in this great country. Obama campaigned on the promise of restoring the top income tax rate to 39.6%, the applicable level during the Clinton administration.

That minimum salary figure equals the increase in yearly taxes that will be paid by a major leaguer who makes $10,000,000 a year if the Obama tax plan becomes law. Incredible. So what's a super-agent to do in this first week of activity in the free agent market?

He has to devise a strategy to get major league clubs to pay some of a player's 2009 compensation prior to the end of 2008. The only way that can happen is in the form of a signing bonus and a quick negotation. You know how some clubs dilly dally around before getting down to business with the players on their clubs that file for free agency? Sometimes it's just to see where the market has valued a player. Sometimes it's because they have no clear plan on what to do. This might jump start that process.

It certainly will be central to the discussions held by Scott Boras, who represents two of the most prized free agents this year: Mark Teixeira and Manny Ramirez. Both seek to sign contracts that pay them more than $100,000,000 during the course of a 5-10 year contract.

During Boras' 2007 negotiations with the Yankees for the services of Alex Rodriguez, I had described Boras' role as akin to an investment banker meeting with a company that wanted to acquire a smaller company. He had a briefing book that stressed return on investment and the increase in value to the acquiring company of having his client in their stable.

This year I think he'll try to convince the clubs that it may be in their best interest as well as a tax advantage for them to characterize salary as a bonus. It's all in the accounting process don't you know?

Follow Paula Duffy on Twitter: www.twitter.com/jurisdiva

Comments

[Sparty1]

Um, I think they can afford it. They don't usually own property. Their apartment doesn't cost that much and the Benz is leased, so they'll be fine.

[sportsd]

Sparty1: I agree they can afford pretty much anything they want. My point was that despite their wealth they have financial advisors ready to preserve it.

[IndyReader]

If the lowest player only makes $400,000, they would only have a tax increase on $150,000 of it, not the whole $400,000. The $250,000 won't get a tax decrease, but neither will it get a tax increase. Obama has been saying this all along.

[martinchill]

are you suggesting that pro athletes and their portfolio managers would try to avoid paying taxes?

why do they hate america?

[sportsd]

Martinchill: I'm suggesting they will look for ways to take income early. It's the employer that has to get creative about how to account for it.

Paula Duffy

[martinchill]

it's cheating the system.... par for the professional course, i suppose.

;p

[Henry]

I once heard Tony Kubeck (announcing with Kurt Gowdy) state that pro baseball players would play the game even if they did not get paid anything! It would be, as you say, for the love of the game and the adoration of the fan-niks. The current group of gold-bricks seems to be a lot like prostitutes, there does not seem to be that romance for the game.

[sportsd]

Henry:The romance has been gone since free agency kicked in. And back then, what we saw as romantic, the players (who are mere employees, like many of us) saw as their inability to get market value for their services.

Paula Duffy