Kershaw Picked Winning, Not a Tax Rate
Clayton Kershaw's seven-year, $215 million contract extension with the Los Angeles Dodgers is a watershed moment for Major League Baseball pitchers. Let's hope it's also enough to finally get anti-tax advocates to stop using athletes to push their cause.
According to the anti-tax movement, the scourge of taxation dictates where players choose to sign by driving them to teams in states that have low or no income tax. These are the same folks who held up Dwight Howard's decision to leave the Los Angeles Lakers for the Houston Rockets as a prime example of what happens when the government's invisible hand pushes labor and capital to places that allow athletes to keep their money.
Setting aside whether you can derive broader patterns from an incredibly specific group of highly skilled workers, Howard's own words show why he, and other players, made his decision: He wanted to win. As I wrote when Robinson Cano foolishly fled the New York Yankees for the Seattle Mariners, athletes must and do consider both economic factors and noneconomic ones that aren't necessarily reflected in base salary. These include sponsorship and marketing opportunities, team culture, engagement with local fans, and, yes, taxes. Most athletes, however, are driven primarily by the desire to win, knowing full well the financial windfall that comes with being a champion.
People like Grover Norquist would like you to believe that a lower state tax can wholly influence where a sports star chooses to play. But by that reasoning, Kershaw would have turned up his nose at the Dodgers' offer and signed with, say, the Texas Rangers or even the Houston Astros for a lower offer that would have resulted in more after-tax income. According to Bloomberg News, Kershaw will still save roughly $6.5 million in taxes over the course of his contract because he resides in Texas, which has no state income tax, and not California, whose 13.3 percent income tax is the highest in the country. But just think how much more of that money he could pocket if he chose to stick it to Uncle Sam and play for the Rangers!
Thankfully, we don't live in that warped reality. Although athletes are certainly businessmen who consider finances in their decision making, no self-respecting player wants to get paid to lose. Even the late George Steinbrenner was more concerned with winningthan making money. Kershaw made the right choice in sticking with a team that has shown a similar drive to the Yankees': Spend to win, taxes be damned.
(Kavitha A. Davidson is a Bloomberg View columnist who writes about sports. Follow her on Twitter at @kavithadavidson.)
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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