TRUMP, DEMS, THE RICH AND TAXES

Chattanooga Times Free Press - - OPINION -

The irony is so de­li­cious.

A seg­ment of the very rich, the same group the left has been say­ing would only grow richer from Pres­i­dent Don­ald Trump’s nearly year-old tax cuts, is now squawk­ing be­cause of all the ex­tra taxes they’ll have to pay.

As part of the tax bill passed by the Repub­li­can Congress last De­cem­ber, the stan­dard de­duc­tion in­di­vid­u­als can take when pay­ing their in­come tax was raised, but de­duc­tions for many in­di­vid­ual items were re­moved.

In ad­di­tion, in­di­vid­u­als can no longer deduct more than $10,000 for state and lo­cal taxes or de­clare miscellaneous item­ized de­duc­tions for work-re­lated ex­penses and in­vest­ment fees.

All these changes have hit pro ath­letes, whose cer­ti­fied pub­lic ac­coun­tants are still tot­ing up the losses, harder than most.

“One of my play­ers makes $2 mil­lion a year,” Steven Gold­stein, a CPA with Grassi and Co. in New York who works with more than a dozen pro­fes­sional ath­letes and celebri­ties, told Steven Kutz of Mar­ketWatch, “and it will cost him $80,000 more now be­cause he can’t deduct state taxes [over $10,000], agent fees, work­out clothes, meals and en­ter­tain­ment, and his cell­phone.”

Most fans are likely to say, “Cry me a river,” and in many cases they’d be jus­ti­fied. While some pro ath­letes toil in their var­i­ous sports’ mi­nor leagues, where the ac­tual pay can be min­i­mum wage or be­low, some pro play­ers make 10s of mil­lions of dol­lars a year in salaries and bonuses, and many more make mil­lions an­nu­ally. A third of NFL play­ers make the league min­i­mum of $480,000 — still not shabby — but the av­er­age NFL ca­reer is only about three years.

Then they’re left like the rest of us in the U.S., whose me­dian house­hold in­come is $63,000. They have to go to work.

So most pro ath­letes are not likely to elicit much sym­pa­thy from work­ing stiffs, whose salary in­creases since the Great Re­ces­sion haven’t been ex­ces­sive and who, even when gen­er­ous, never had enough de­duc­tions to qual­ify for any­thing more than the old, smaller stan­dard de­duc­tion.

How­ever, taxes al­ready are hav­ing an ef­fect on where some pros play and where they live. While the most im­por­tant as­pect of a pro ca­reer for younger play­ers is mak­ing a team and be­com­ing es­tab­lished, vet­er­ans in many cases have the abil­ity to be se­lec­tive. And the way some are be­ing se­lec­tive is choos­ing to play for a team lo­cated in a state with no in­come tax (Florida, Ne­vada, Texas and Wash­ing­ton are those with pro teams).

Ten­nessee is an­other state with ma­jor pro teams and no in­come tax, but it does tax div­i­dend in­come and in­ter­est.

Play­ers, thus, can play their home games in such a state and save in­come tax on those games and on their en­dorse­ment earn­ings. But they still have to pay in­come tax for the amount they make dur­ing road games in states with in­come tax.

Some play­ers even have cho­sen to live in a state with no in­come tax but play in one that has it. When that oc­curs, tax laws re­quire play­ers to prove they were in their “domi­cile” state for at least 183 days (a ma­jor­ity) of the year.

“New York is ag­gres­sive with au­dit­ing when high earn­ers try to claim res­i­dency some­where else,” CPA Sean Packard, tax di­rec­tor with OFS Wealth in McLean, Vir­ginia, told Mar­ketWatch. “I’ve had play­ers go through it.”

How­ever, Mar­ketWatch tax guru Bill Bischoff says tax rules are likely the rea­son the Nov. 23 Tiger Woods-Phil Mick­el­son golf match was staged in Ne­vada, a no-in­come-tax state. Mick­el­son, who had com­plained about the ex­or­bi­tant state in­come taxes he pays as a Cal­i­for­nia res­i­dent (up to 13 per­cent), pock­eted $9 mil­lion for his win.

Of course, the tax news for pros isn’t all bad. The year-old tax law low­ered rates on the high­est tax bracket from 39.6 per­cent to 37 per­cent, caus­ing the left’s ini­tial gripe.

And, even though many of the de­duc­tion loop­holes have been closed, tax pros says the 1 per­center ath­letes still have op­tions. Where taxes are con­cerned, aren’t there al­ways?

They say set­ting up an LLC (lim­ited li­a­bil­ity com­pany) could be right for some play­ers, given their en­dorse­ments and busi­ness in­ter­ests, but the costs of those type of set-ups of­ten mit­i­gate the sav­ings they would get.

Pros, as the say­ing goes, need to con­sult their lo­cal (busi­ness) list­ings.

As for some Democrats, they were quick to trot out the usual lines last De­cem­ber.

“In­stead of pro­vid­ing a tax cut that over­whelm­ingly ben­e­fits the mid­dle class,” said U.S. Sen. Joe Don­nelly, D-In­di­ana, “this bill cuts taxes for the wealth­i­est Amer­i­cans.”

“This tax plan doesn’t live up the com­mit­ment I got from Pres­i­dent Trump,” com­plained U.S. Sen. Claire McCaskill, D-Mis­souri, “when he told me he wouldn’t sup­port tax re­form that ben­e­fited the very rich at the ex­pense of the lit­tle guy.”

Don­nelly and McCaskill by now have learned the truth about the rich and their taxes, but it’s too late. Both lost their elec­tions last month.

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